What is the IRS e-file program?
A program that allows taxpayers to transmit their returns electronically.
The IRS e-file program results in quicker processing and fewer errors compared to paper returns.
What is the e-file mandate for tax preparers?
Paid preparers who prepare more than ten individual and/or trust returns a year are required to e-file these returns.
This mandate applies to Forms 1040 and 1041, and returns must be e-filed if the total number exceeds 10, even if an individual prepares fewer.
Who is exempt from the e-file mandate?
- Foreign preparers without Social Security numbers.
- Fiduciaries filing in their fiduciary capacity.
- Preparers with a waiver for financial hardship.
- Members of recognized religious groups opposed to e-filing.
Fiduciaries are not considered tax preparers even if compensated, and religious exemptions do not require Form 8944, Preparer e-file Hardship Waiver Request
What is the e-file mandate for entities?
Entities must e-file their self-prepared business tax returns and other information statements if they file 10 or more of these statements in a year.
This includes corporate, partnership, UBIT, information, and excise tax returns, but excludes employment tax returns (Forms 940, 944 and 941) and extension requests (Form 4868 and Form 7004).
What is required to apply for an Electronic Filing Identification Number?
(EFIN)
- Create an IRS e-Services account.
- Provide personal information including a Social Security number.
- Comply with fingerprinting and suitability checks if not an enrolled agent, CPA, or attorney.
EFINs are non-transferable and required for each physical location where e-file transmissions occur.
What is an Electronic Return Originator?
(ERO)
An ERO is the IRS-authorized e-file provider that originates the electronic submission of a taxpayer’s return to the IRS.
An ERO may either prepare the return themselves or submit a return prepared by a taxpayer who has self-prepared their return. They must obtain authorization from the taxpayer to e-file the return.
What responsibilities do Electronic Return Originators have?
(EROs)
EROs must timely submit returns, and can only submit a taxpayer’s return after receiving authorization.
The return must be prepared by the ERO or collected from a taxpayer who self-prepared their return.
What are the requirements for an ERO when submitting a tax return?
- Timely submit returns.
- Submit any required supporting paper documents to the IRS.
- Provide a copy of the return to taxpayers.
- Retain records of each return filed and make those records available to the IRS.
- Work with the taxpayer to correct a rejected return.
- Enter the preparer’s identifying information (name, address, and PTIN).
- Be vigilant in detecting and reporting fraud and abuse to the IRS.
- Cooperate with IRS investigations by providing requested documents.
When does an ERO become an income tax return preparer?
When they make substantive changes to a tax return that they did not originally prepare.
Non-substantive changes include corrections to transposition errors, misplaced entries, spelling errors, or arithmetic corrections. All other changes are considered substantive.
What is the role of an authorized transmitter in the e-filing process?
An authorized transmitter is typically a software company that submits the tax return to the IRS after receiving it from an ERO.
Examples of authorized transmitters include software companies like Lacerte, ProSeries, TaxSlayer, and Drake.
How long must authorized e-file providers retain a record of each electronic postmark?
Until the end of the calendar year.
Tax software packages typically retain a record of the return transmission report and electronic postmark automatically.
What are the two methods available for electronic signatures on individual income tax returns?
- Self-Select PIN Method
- Practitioner PIN Method
The Self-Select PIN method requires the taxpayer to provide their prior-year AGI or PIN, while the Practitioner PIN method does not.
How long must a preparer retain Form 8879, IRS e-file Signature Authorization?
At least three years from the return due date or the IRS received date, whichever is later.
Form 8879 is not submitted with the return unless requested by the IRS.
What is the purpose of Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return?
To send required paper forms or supporting documentation that cannot be transmitted electronically with an e-filed return.
This form must be mailed to the IRS within three business days after receiving acknowledgment that the IRS has accepted the electronically filed return.
How must a practitioner verify a taxpayer’s identity when the taxpayer signs electronically?
- In-person: Inspect a valid government-issued picture ID.
- Remote: Verify personal information through record checks with applicable agencies or institutions.
For remote transactions, a credit check or other identity verification is optional.
What should a preparer do if an e-filed return is rejected by the IRS?
The preparer must notify the taxpayer within 24 hours and provide them with the reject codes and explanation.
If the return cannot be corrected or accepted by the IRS, a paper return must be filed.
What is the ‘perfection period’ for correcting rejected e-filed returns?
The perfection period is the time allowed to correct a rejected e-filing:
- Five calendar days for individual returns
- Ten calendar days for business returns
This period allows the preparer to correct errors and resubmit a tax return without a late filing penalty.
What must be included with a paper return filed after an e-file rejection?
- An explanation of why the paper return is being filed after the due date
- A copy of the rejection notification
- A brief history of actions taken to correct the electronic return
The taxpayer should write in red at the top of the first page: ‘REJECTED ELECTRONIC RETURN-(DATE)’
What is the purpose of Form 8948, Preparer Explanation for Not Filing Electronically?
To provide a valid reason for not e-filing an electronically prepared return, such as taxpayer choice or an e-file rejection, and must be attached to the paper return.
Which tax returns cannot be processed using IRS e-file?
- Estate tax returns (Form 706)
- Gift tax returns (Form 709)
- Older amended individual tax returns
- Individual tax returns with fiscal year tax periods
- Returns containing forms or schedules that cannot be processed by IRS e-file
- Tax returns with taxpayer identification numbers within the range of 900-00-0000 through 999-99-9999
- Returns with rare or unusual processing conditions (such as nonresident and dual-status ailen returns)
When should a taxpayer complete and file Form 14039, Identity Theft Affidavit, with a paper tax return?
When the taxpayer is a victim of identity theft affecting their federal tax records, to alert the IRS and request resolution.
What should a taxpayer do if they cannot obtain a correct Form W-2 from their employer?
File the return after completing Form 4852, Substitute for Form W-2, Wage and Tax Statement.
True or False:
A tax preparer can advertise that pay stubs can be used to file tax returns early.
False
What must an IRS e-file provider not use in their advertising?
The regular IRS logo (the eagle symbol) or any insignia implying a special relationship with the IRS.
The may use the IRS e-file logo but cannot use the word “federal”.
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Essential Tax Law Updates for Representation12
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Unit 1: Legal Authority of the IRS30
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Unit 2: Practice Before the IRS31
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Unit 3: Authorizations and Disclosures31
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Unit 4: Circular 230 and Best Practices31
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Unit 5: Practitioner Standards and Tax Advice28
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Unit 6: Due Diligence for Refundable Credits and HOH Filing Status19
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Unit 7: Recordkeeping Requirements and Penalties51
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Unit 8: Practitioner Misconduct23
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Unit 9: Tax Payments and IRS Collections48
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Unit 10: The IRS Examination Process32
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Unit 11: IRS Appeals and the U.S. Tax Court19
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Unit 12: The IRS E-File Program29
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Unit 13: Identity Theft and Safeguarding Taxpayer Data25
