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Electronic vs. Paper Tax Return Submissions

I’m often asked why I don’t e-file my client’s Federal and State income tax returns. The simple answer? A lack of confidence in the system.

Case in point. The online Colorado Department of Revenue Wage Withholding Zero Filing System failed on October 31, 2009.

I happened to file a number of 3rd Quarter returns for my clients on that very date.I always print out the confirmation screen from the state DOR website as well as the received email confirmation.  Always.

Two weeks later my clients received a “nonfiler notification” letter informing each of them that the State’s records showed that their respective 3rd Quarter returns had not been received.

Fortunately no penalties or fines were assessed because we were able to demonstrate the returns had been submitted. What I couldn’t prevent was the initial shock my clients experienced upon opening the nonfiler correspondence ….and my frustration in having to respond to each erroneous letter.

Of course, as you may already know, starting on January 1, 2011 CPA practices will be required to file all client income tax returns electronically. Hopefully all of the bugs will be worked out of each separate filing system one year from now.

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