U.S. companies required to e-file are spending more time and money on compliance than before the electronic process was made mandatory, a new survey conducted by Deloitte Tax LLP has found. A majority of those surveyed said the time they spent on compliance (61 percent) and the costs (68 percent) in filing their 2005 federal tax returns had increased by as much as 19 percent.
Recent changes in e-file transition rules and the expansion of the e-file mandate make planning for e-filing an important aspect of compliance planning for tax year 2006. About 70 percent of executives reported their company had engaged in some form of planning to prepare for the mandate the Deloitte Tax survey found. A majority – 65 percent – also believe e-filing will increase the efficiency in filing returns, and 57 percent said it should lead to earlier filing of tax returns. Only 20 percent expected the benefits from e-filing would outweigh the costs within five years.
The findings were based on a survey of 312 senior corporate tax executives. Most of the survey respondents were from companies with reported annual revenues of $1 billion or more, and who held senior positions within their companies, such as the head of their corporate tax function.
They spoke both of their experiences on preparing and filing the 2005 federal returns electronically and how the IRS mandate might affect their companies. The mandate requires certain large corporations and tax-exempt organizations to e-file Form 1120, Form 1120S, or Form 990 for tax periods ending on or after December 31, 2005, using the new IRS Modernized e-File (MeF) system.
“Clearly, the e-filing mandate had some challenges in its first year, but knowing that the mandate applies to your company, and taking some preparatory steps can help avoid potential stumbling blocks,” said Nathan Andrews, the national tax partner leading Deloitte Tax’s e-Filing Project Management Office. “With year one behind us, corporate filers, tax preparers, software providers, and the IRS continue to work together to improve e-filing compliance.”
Ninety-two percent of executives surveyed said their company had not changed their primary tax software due to the e-file requirement, and 87 percent said they used the same tax software for filing of both international and domestic forms. Additionally,, 66 percent of executives surveyed said they were satisfied with the ability of their primary tax software to handle e-filing (rated 4 or 5 on a 5-point scale).
A complete copy of the survey results can be found on Deloitte’s website at: