Federal/State e-file Question and Answers For Tax Professionals
- How does Federal/State e-file work?
- Can all Federal and State income tax returns be filed using this option?
- How will using this option benefit my business?
- If a taxpayer owes additional Federal and State taxes, can one authorization cover both payments?
- What do I need to do to get accepted into the State e-file program?
- Do all States require a taxpayer signature document?
- Where else can I learn about Federal/State e-file?
- Who should I contact if I am interested in State e-file programs only? Is the point of contact different than that for Federal/State e-file?
- Can I get more details on the State programs?
- What is State Only e-file?
- Will the IRS still handle the state returns, or will the transmitter send them directly to the state?
- Are there new validations for State Only e-filing?
- Will a dummy federal return be required or only an indicator?
- Could a rejected state return be retransmitted after the federal is accepted?
- Can two state returns for the same state be allowed with one federal return?
- Will State Only returns with Foreign Addresses be accepted?
- Will State Only returns be segregated in their own batches?
- Will every state participate?
Q. How does Federal/State e-file work?
A. Federal/State e-file allows the electronic filing of both Federal and State income tax returns at the same time. The electronic filing software places the Federal and State return data in separate packets. These packets are transmitted to the IRS in one taxpayer "envelope." The IRS functions as an electronic post office for the participating State, which receives and processes the state electronic return.
Q. Can all Federal and State income tax returns be filed using this option?
A. No, Federal/State e-file is available in the following 37 states and the District of Columbia.
|District of Columbia||Missouri||South Carolina|
|Illinois||New Mexico||West Virginia|
Q. How will using this option benefit my business?
A. Benefits include:
Fast Processing - The IRS and States can process e-file returns much more quickly than those that are filed on paper. It saves time and brings your clients their Federal and State income tax refunds faster.
Improved Accuracy - Tax preparation software eliminates errors you may make, and e-file processing of the Federal and State return eliminates most errors. The error rate on an e-file return is less than 1%.
Proof of Filing - Your clients can meet their Federal and State tax obligations all at once. The IRS and State agency will provide an acknowledgment that your client's returns have been received and accepted.
Direct Deposit - Your clients can have their Federal and State refunds directly deposited into their checking or savings account.
Convenience - Your clients have the option to file early and pay any balance due by April 15.
Q. If a taxpayer owes additional Federal and State taxes, can one authorization cover both payments.
A. No. The Direct Debit payment option in the IRS e-file software is available for Federal tax payments only. Similarly, if choosing to pay by credit card, the Federal payment cannot be combined with a State payment. If a balance due is owed for the State return, normal payment procedures for that State should be followed.
Q. What do I need to do to get accepted into the State e-file program?
A. All States require that you be accepted in the Federal e-file program first. Most States automatically accept e-filers in their state. Review the state application process in the attached summary
Q. Do all States require a taxpayer signature document?
A. Yes. Some states have assigned taxpayers a Personal Identification Number to be used as a State signature, some States have the Electronic Return Originator retain the signature document, some States have the taxpayer retain the signature document. The attached summary tells you each State's signature process.
Q. Where else can I learn about Federal/State e-file?
A. Information is available through the IRS toll-free telephone service (1-800-829-1040), your State tax administration office, or through your e-file Coordinator">State e-file Coordinator (some do not participate with Federal/State e-file but have their own State e-file programs).
Q. Who should I contact if I am interested in State e-file programs only? Is the point of contact different than that for Federal/State e-file?
A. To obtain more information on State e-file programs, contact your e-file coordinator">State e-file coordinator. In most cases, the State and Federal/State e-file coordinator are the same person.
Q. Can I get more details on the State programs?
A. Yes. The attached list provides you with a brief summary of each of the fifty States. Nine states have no income tax. The rest have Federal/State e-file and/or Direct e-file programs. Additionally, most States have now established TeleFile programs and some are beginning to establish direct Internet e-file programs for home computer users. The attached summary has additional information.
State Only e-file
Q. What is State Only e-file?
A. Taxpayers will have the choice of e-filing a State Return without the standard Form 1040 attached for the following instances:
- Previously rejected state e-file return
- State return input separately from Federal return
- Part-year resident state return
- Multiple state returns for one taxpayer
- Non-resident state returns
- Married filing separately with state, but filing jointly with Federal
Q. Will the IRS still handle the state returns, or will the transmitter send them directly to the state?
A. The IRS will continue to process Federal/State e-filing with the same type of validations. Some states provide the option for direct electronic transmission of state returns. State Only returns will be sent to the IRS and passed to the state after validations occur.
Q. Are there new validations for State Only e-filing?
A. Validations for State Only e-filing include:
- Transmission Rejection (Error Reject Code 0832) if Total-State-Only-Return-Count not correct
- Return Rejection (Error Reject Code 0517) if SSNs do not match within all records in envelope or match the IRS Master File
- Return Rejection (Error Reject Code 0040) if the State-Only Form 1040 Page 01 exceeds the expected number of fields
Q. Will a dummy federal return be required or only an indicator?
A. The State Only return will be attached to a "Dummy" 1040 (page 1). The State Abbreviation field of the Form 1040 must contain the value "SO", indicating that State Only return data is attached. The highest sequence number present on the Form 1040, page one, should be the Address Indicator, sequence 0097.
Q. Could a rejected state return be retransmitted after the federal is accepted?
A. Yes, as a State Only return.
Q. Can two state returns for the same state be allowed with one federal return?
A. There can only be one state packet attached to the federal return. Likewise, there can only be one state packet attached to the State Only 1040 Page 01.
Q. Will State Only returns with Foreign Addresses be accepted?
A. The IRS will accept State Only returns with Foreign Addresses.
Q. Will State Only returns be segregated in their own batches?
A. State Only returns will not be segregated into separate batches. They will be submitted within regular 1040 transmissions. The State Only returns will be included with Federal/State returns in the state return files that the state retrieves.
Q. Will every state participate?
A. The IRS will forward all validated State Only returns to the states. It will be the responsibility of the state to acknowledge/reject the State Only return, and/or to inform the transmitter if the state does not participate in State Only filing.
The following 34 states have indicated that they will participate in State Only e-filing.
|Illinois||New Mexico||West Virginia|