The IRS does not charge a fee to e-file tax returns, but there are costs paid by the tax preparer for e-filing, either directly or indirectly. Tax preparers who anticipate preparing eleven or more tax returns must e-file all tax returns unless a hardship waiver is granted. Ultimately, the client pays an e-filing fee.
Some tax preparers purchase a pay-per-return license for their professional tax software. The software may allow them to view or print a return, but will not permit e-filing without the tax preparer paying an additional fee. Software companies that charge a flat fee for an unlimited number of tax returns may charge a separate fee or may include all e-filing at no extra charge. In either case, part of the software cost can be considered a filing fee.
Labor is an indirect cost of e-filing, but no tax return is e-filed without it. Each return is reviewed one last time before it is e-filed. Once the tax return is e-filed, there is no taking it back. If an error is discovered, the tax return must be amended. After the return is e-filed, the IRS sends an acceptance or rejection notice through the tax software. If rejected, changes are made, and the tax return is e-filed again. Tax professionals are sure to cover labor costs in their fees.
Though it may not be obvious to a client, administration costs are part of e-filing a tax return. The tax preparer's business exists to prepare tax returns that must be e-filed, an indirect cost of e-filing. Administrative costs include insurance, office supplies, repairs, education, rent and other expenses necessary to keep the business running smoothly. Some tax professionals charge a processing fee to each client to cover these costs, while others bury the cost in the price of the tax return preparation fee.
When all is said and done, the client ultimately pays a fee for e-filing. The amount may not be on an invoice, but the fee is included. From a client's perspective, it is more important to know the total price of a tax return, rather than the cost to e-file. If you prepare your own tax return, find out what the software company charges to e-file. Then you will know the full price of the software.
- IRS: ERO Technical Fact Sheet
- IRS: E-File Application and Participation
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- IRS.gov. "Get Your Refund Faster: Tell IRS to Direct Deposit your Refund to One, Two, or Three Accounts." Accessed March 19, 2020.
- IRS.gov. "Free File: Do Your Federal Taxes for Free." Accessed March 19, 2020.
- IRS.gov. "Apply Online for a Payment Plan." Accessed March 19, 2020.
- TaxAct. "Check E-File Taxes Status." Accessed March 19, 2020.
- H&R Block. "Accuracy/Calculation Guarantee." Accessed March 19, 2020.
- IRS.gov. "Frequently Asked Questions to Help Taxpayers Obtain IRS Tax Products." Accessed March 19, 2020.
Doug Berthon is an enrolled agent and owns ProActive Tax & Accounting LLC. He earned his Bachelor of Science in accounting from Metropolitan University in St. Paul, Minn.