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November 09, 2007

A new IRS web initiative could mean the end of a post-tax season ritual.

The ritual goes like this:

- Taxpayers send their stuff to the preparers. They say they made estimated tax payments of X.
- Preparers file the returns, taking a credit for estimated tax payments of X.
- A few weeks later the IRS sends a letter to the taxpayers, telling them that they don't get a refund because estimated tax payments weren't X, but instead X - Y.
- Taxpayers blame tax preparers.
- Preparers try to deflect blame.

The IRS proposes to allow taxpayers to access their personal data through the IRS web site, starting as early as this summer, according to an IRS spokesman quoted by Tax Analysts ($link). The program, called "my IRS account," would allow taxpayers to access three years of information, to input address changes, and to transact other tax business, according to David R. Williams, director of the IRS Office of Electronic Tax Administration. From the Tax Analysts report:

Williams said the IRS is hoping the program would allow taxpayers to view three years of prior tax information, but that the specifics and the timing were still in flux.

"We're still working on the details," he said. "We want to make sure that when taxpayers and users actually come to us, this is useful information and they know how to get to it. And we want to make sure it's secure."

Williams stressed repeatedly that security and taxpayer authentication for the Web service is the IRS's first priority.

This would mean preparers could double-check the timing and amount of the taxpayer's estimated tax payments, which could help both in preparing correct returns and in identifying missed payments during the tax year. Iowa already has a similar program that works reasonably well; as far as I know, there have been no security problems with it.

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I LOVE the Iowa estimate lookup. I think 50% of our IRS notices come from incorrect estimate payments, along with those inevitable phone calls confirming a 4th quarter estimate payment was made in January, but they didn't include because they paid it the year after.

Me, too. That's why I'm so excited to see this.

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