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Background

In 2011, e-filing was required for paid preparers submitting more than 100 individual income tax returns. In
2012 the threshold falls to 10 returns. The vast majority of individual returns will be e-filed. The way the IRS
processes these returns is radically different from the processing of paper filed returns. Tax returns are now
being reviewed in a limited manner prior to e-filing acceptance.

Pre e-filing review and submission process

Prior to e-filing the IRS would key in information from paper copies of individual income tax returns. The
return would be processed before any substantive review of the content would occur.

The review process occurring later involved marching up payor documents against what was reported in the
paper copy of the tax return. These documents included:

  • Reports on interest and dividend income (1099-Int and 1099-Div)
  • Mortgage interest statements (1098-Mis)
  • Wage reports (W-2)
  • Pension distributions (1099-R)
  • Stock sales (1099-B)
  • Income reports from passthroughs (K-1)
  • Independent contractor income (1099-Misc)
  • Tuition statements (1098-T)