A 2009 law (.pdf) meant to require most professional tax preparers to send tax returns to the Internal Revenue Service via the Internet includes a loophole that permits them to nonetheless be in compliance should their clients file via regular mail, says the Treasury Inspector General for Tax Administration.

In a report dated Dec. 20, TIGTA says the law's language regarding tax preparer e-filing requires a tax return to be e-filed only if "such return is filed by such tax return preparer."

In other words, if the tax preparer finishes the tax return of a client, and then gives a paper copy to the client for him or her to physically mail to the IRS, the tax preparer is in compliance with the law, which is the Worker, Homeownership, And Business Assistance Act of 2009.

The IRS estimated in 2009 that processing a paper return costs $3.29 while an e-filed return costs 19 cents.

Because of the loophole, the IRS has adjusted downward its projections of e-filing rates among professional tax preparers, TIGTA says. The tax agency originally projected that it would achieve an 82 percent e-file rate in 2011 and 84 percent in 2012, but now says the rates will be 75 percent and 77 percent, respectively.

Congress could change the law so that it requires most tax return prepares to e-file if a return is "prepared or filed," the report notes.

For more:
- download the report, TIGTA 2012-40-010 (.pdf)

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