ADOR Mandates Electronic Filing for Preparers

The Alabama Department of Revenue has announced that certain tax preparers will be required to electronically file all "acceptable individual income tax returns" during the 2005 calendar year. In its July 9, 2004 announcement of the new program, ADOR projects that approximately 300,000 individual income tax returns will be electronically filed in Alabama, resulting in significant financial savings in processing costs for the Department.

Requirement Based on Number of Returns Prepared

Mandatory efiling applies to those preparers who prepare 250 or more acceptable returns using tax preparation software in 2004, or 100 or more acceptable returns using software in 2005. If a preparer prepares 50 or more acceptable returns using tax preparation software in 2006 or later, the preparer then is required to file all of its returns electronically. Regulations and "Frequently Asked Questions" published by ADOR in conjunction with the announcement make it clear that "preparers" subject to the new rules are either

  • Any person who prepares an Alabama individual income tax return in exchange for compensation, or
  • Any person or entity that hires someone to prepare Alabama individual income tax returns.
A preparer who prepares the specified number of returns is subject to mandatory efiling of Alabama returns even though that preparer does not have an office in Alabama; and a preparer with multiple offices must aggregate the returns prepared by all offices for purposes of the return count.

An acceptable individual income tax return is an original income tax return that is authorized by ADOR to be filed using electronic technology as defined in Alabama Code 40-30-6.

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New Rules Enforced By Random Audits

The Regulations provide that a preparer will be subject to a random audit of any acceptable individual income tax return that is not filed electronically unless the preparer can show that the failure to efile was due to a "reasonable cause" and was not due to "willful neglect". For purposes of this rule, reasonable cause includes, but is not limited to:

  • A taxpayer's election not to electronically file his or her acceptable individual income tax return. The taxpayer's election to "opt out" of electronic filing is evidenced by the taxpayer's signature on a paper original tax return; or
  • Any electronically prepared individual individual income tax return that cannot be transmitted by the preparer or accepted by the Department.

This page last updated 7/26/04

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