How Modernized E-File Technology Affects Accounting Workflow

In 2004, the IRS began transitioning the electronic transmission method it uses to process tax returns to a new method called Modernized E-File (MeF). MeF replaces the older legacy system for e-File and represents the next generation of technology for tax return filing. Lacerte and ProSeries tax software are among the first tax products to support MeF for business and 1040 returns. Here are 6 ways MeF affects your workflow.

Attachable PDFs: PDF forms can now be attached to any business or 1040 return e-Filed through Lacerte or ProSeries.

More Explicit Error Conditions: Under the legacy e-File system, one error code could apply to multiple types of e-File error conditions. With MeF, error code explanations more accurately pinpoint the location of the error in the return and provide more complete information. This means you save time having to track down what an error means and what specifically generated the error.

More Diagnostics: Under MeF, business rules regarding what can and cannot be submitted on a tax return are more refined and much more specific. This means that previous entries or overrides that may have not triggered an error in similar prior year returns may now trigger an error or a diagnostic. For this reason, you may also see more diagnostics generated on your tax returns versus previous years.

Real-Time Acknowledgements: Unlike legacy e-File, where returns were processed once or twice daily, transmissions submitted under MeF are processed upon receipt and acknowledgements are returned in near real-time. However, depending on how quickly the receiving e-File agency is able to process those requests, e-File acknowledgements can occur anywhere between 10 minutes to 5 days. In fact, last year, some agencies weren’t able to provide e-File acknowledgements of transmissions for as long as 2 weeks.

Integrated Payment Option: You can e-File a balance due return and, at the same time, authorize an electronic funds withdrawal from your client’s bank account. Note: Payments are subject to limitations of the Federal Tax Deposit rules.

New Tracking: Under the legacy e-File system, Lacerte and ProSeries assigned a unique 14-digit number called a DCN (Declaration Control Number) to each tax return when e-Filed using the software’s Validate/Send Returns feature. Under MeF, returns are now assigned a unique number called a Submission ID. This number is created after a return has either been rejected or accepted by the e-File agency.

Submission IDs are unique to each transaction performed – not the return. For example, if a return is e-Filed and rejected, that rejection will have a unique Submission ID. When that return is corrected and then e-Filed again, a new unique Submission ID will be generated. Under MeF, if you have to contact an e-File agency about a return, you must provide the agency with the unique Submission ID associated with the specific transaction you’re trying to track down.

Remember that MeF is designed to offer you efficiencies, so it’s very important that you understand all you can about MeF before busy season as well as how the features in Lacerte or ProSeries can help your tax prep.