E-filing can carry risks of late tax payment

Taxpayers in Maryland are increasingly using e-filing technology to submit their tax returns to the Internal Revenue Service each year. Tax returns must be filed each year in a timely fashion in order to avoid potential penalties. In the past, this simply meant mailing off a paper return before the due date, and the famous "mailbox rule" applied to tax returns filed close to the deadline. Lines at U.S. post offices were a frequent sign as April 15 approached.

However, many taxpayers use online systems to electronically file tax returns, eliminating the use of mail and much of the utility of the mailbox rule. When a paper return is filed through the mail, it is not considered a late filing even if it contains errors that require correction and re-submission. The situation can be different for e-filed returns. While the mailbox rule does apply and a return is considered timely as long as it is transmitted in an authorized, processable manner, rejections can complicate e-filing.

Resubmissions are considered timely if they are mailed or transmitted within 10 days after an initial rejection. However, some rejected returns may be unrelated to the transmission but address factual concerns, such as a dependent claimed by two different taxpayers. This kind of conflict would require further investigation but would not affect the timeliness of a paper return. Some lawyers and advocates are urging the institution of a 30-day grace period rather than the 10-day period for correcting errors in e-filed submissions to bring the situation closer to that of people who use paper filing.

The timeliness of submitted tax forms may be a serious concern for taxpayers, because late tax payment or delayed filing can lead to penalties. Avoiding late filing is a priority for many Americans and one of the reasons for the popularity of e-filing. For people struggling with tax debt or late filing penalties, a tax lawyer can help to provide representation, negotiate with the IRS for potential settlements and work to resolve the tax situation for their client.

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