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What’s New with e-Filing—and When Should You Use It?

Written by Eva Rosenberg on March 29, 2013 in Tax  |   No comments

The other day, Bill Porter of Pride Tax Preparation told me that he was able to electronically file a tax return with attachments. Hip hip hooray! Tax pros have been waiting for this development for a long time. What does this mean for you? It…

tax return tax paperworkThe other day, Bill Porter of Pride Tax Preparation told me that he was able to electronically file a tax return with attachments. Hip hip hooray! Tax pros have been waiting for this development for a long time.

What does this mean for you? It means that you, too, may now e-file with attachments—if your software provider offers this service. Most of the major companies do, but ask to be certain.

What can you attach to an e-filed tax return?

All attachments are related to the checkboxes on Form 8453—the transmittal form that lists the attachments in your tax return.

For the average person, attachments may include vehicle donations and other non-cash charitable contributions over $500, a signed release from an ex-spouse allowing you to claim your child as a dependent, or a long list of securities sales generating your capital gains and losses. If you have anything other than these transactions involved in your tax filing, get a tax pro involved.

In fact, if your securities sales cover several pages, consider asking your tax pro to run your brokerage report through a new product by the folks at NetBasis.com, called the 8949 Verifier. This software will compute the correct gains or losses for your 2012 activity. It’s new and somewhat experimental, so if your tax pro isn’t familiar with it, don’t hesitate to contact NetBasis.com for help.

When should you file on paper?

If anything needs an explanation, especially a detailed explanation, file on paper. For example, imagine that you’ve opened a savings or investment account in your name, but other friends or family members also own it. To split the earnings among your crowd, you will pick up the full income on your tax return, then deduct the others’ shares with a note saying “SEE STATEMENT XYZ ATTACHED.” On that statement, you can explain why some of those earnings are not yours. List all of the owners, including each person’s name, address, and Social Security number. Of course, you also could just issue a 1099-INT, 1099-DIV, or 1099-B, or file a partnership tax return.

Other instances include disclosures, especially when you’re not absolutely certain you’re computing something or doing something correctly. When you make a major error on your tax return that causes the tax or income to be reduced by 25 percent or more, the IRS can audit you for six years. However, if you provide enough detail in your explanation that the IRS should have known to ask questions right away, the courts will prevent the IRS from auditing after three years.

When should you use a tax pro?

Seek out a tax pro:

  • When you’re starting a business, setting a rental, or depreciating anything for the first time.
  • When you sell property or face cancellation of debt income (foreclosures, short sales, or credit card debt).
  • When you do a tax-free exchange.

Any time you’re facing something that you don’t really understand, invest in the advice of a good tax pro (see my previous article, Six Tax Resolutions for the New Year). We’re here to help. Really.

Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.

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