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Handbook
for Authorized IRS e-file Providers
of Individual Income Tax Returns
Contents
Chapter 1
Stay Informed
Why a New Publication 1345?.
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Where to get Additional Information
Chapter 2
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Must Read Information
Publications for Individual Income Tax Returns
Safeguarding IRS e-file
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“Returns Filed” Using IRS e-file
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Returns Not Eligible for IRS e-file . . . . . . . . . . . . . .
Submitting a Timely Filed Electronic Tax Return .
Federal/State e-file .
Chapter 3
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Electronic Return Origination
Obtaining, Handling and Processing Information from Taxpayers .
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Safeguarding IRS e-file from Fraud and Abuse . . . . . .
Verifying Taxpayer Identification Numbers . . . . . . . . .
Be Aware of Non-Standard Information Documents .
Be Careful with Addresses . . . . . . . . . . . . . . . . . . . . . . .
Avoiding Refund Delays. . . . . . . . . . . . . . . . . . . . . . . . .
Refund Returns
Direct Deposit of Refunds .
Balance Due Returns .
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Electronic Funds Withdrawal . . . . . . . . .
Credit Card Payments . . . . . . . . . . . . . . .
Electronic Federal Tax Payment System
Pay by Check . . . . . . . . . . . . . . . . . . . . . .
Installment Agreement Requests . . . . . . .
Signing an Electronic Tax Return
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Electronic Signatures for Taxpayers .
IRS e-file Signature Authorization. . .
Electronic Signatures for EROs . . . . .
Paper Signatures . . . . . . . . . . . . . . . . .
Sending Paper Signatures to the IRS .
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Submitting the Electronic Return to the IRS .
Submission of Paper Documents to the IRS
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ERO Duties After Submitting the Return to the IRS
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Record Keeping and Documentation Requirements .
Providing Information to the Taxpayer . . . . . . . . . . .
Acknowledgments of Transmitted Return Data. . . . .
Resubmission of Rejected Tax Returns . . . . . . . . . . . .
Advising Taxpayers about Refund Inquiries . . . . . . . .
Refund Delays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refund Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Other EROs .
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IRS Sponsored Programs . . . . . . . . . . . . . . . . . . . . . . . .
Employers Offering IRS e-file as an Employee Benefit
Chapter 4
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Transmission
Requirements .
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Additional Requirements for Participants in Online Filing .
Electronic Postmark .
Transmitting for Federal/State e-file
Chapter 5
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Other Authorized IRS e-file Provider Activities
Intermediate Service Providers .
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Additional Requirements for Participants in Online Filing.
Software Developers
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IRS e-file Rules and Requirements
Additional Requirements for Participants in Online Filing .
Financial Products .
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RALs and Other Financial Products .
Fee Restrictions . . . . . . . . . . . . . . . . .
Advertising Standards
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Disclosure of Tax Return Information.
Preparer Penalties .
Paperwork Reduction Act Notice .
Glossary
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Additional Requirements for Participants in Online Filing.
Chapter 6
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Chapter
1
Stay Informed
Why a New Publication 1345?
This edition of Publication 1345, Handbook for Authorized IRS e-file Providers,
replaces the previous edition revised January, 2001. Information previously included
in this publication, pertaining to application, and to participation in IRS e-file by all
Authorized IRS e-file Providers, is now in the revised Publication 3112, titled IRS e-file
Application and Participation. Some information in this publication is reorganized to
more clearly show the rules that apply to all Authorized IRS e-file Providers filing
Individual Income Tax Returns. Some rules may have previously appeared to pertain
only to Electronic Return Originators. This publication continues to address only
the rules and requirements for participation in IRS e-file by Authorized IRS e-file
Providers filing Individual Income Tax Returns and related forms and schedules.
Following is a brief description of changes included in this publication:
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Chapter 1 – Stay Informed
“Where to Get Additional Information” is updated to include:
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The new web site feature Where’s My Refund;
Subscription services for QuickAlerts and the IRS Digital Dispatch;
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New telephone numbers for e-Help and the Refund Hotline; and
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Information regarding Nationwide Tax Forums may also be found on the
IRS web site at irs.gov.
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Chapter 2 – Must Read Information
Married Filing Separate filing status returns in community property states
(Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington,
Wisconsin) is removed from returns not eligible for IRS e-file.
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Stay Informed
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Chapter 3 – Electronic Return Origination
The Provider must not alter the Direct Deposit information in the electronic record
after taxpayers have signed the tax return.
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References to Direct Debit are changed to “electronic funds withdrawal.”
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Payments of balance due for Form 2350, Application for Extension of Time to File for
U.S. Citizens and Resident Aliens Abroad Who Expect to Qualify for Special Treatment
can be made by electronic funds withdrawal.
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Taxpayers can pay balances due and estimated taxes year round using the Electronic
Federal Tax Payment System (EFTPS). Payments may be scheduled 365 days in
advance. Taxpayers must first enroll.
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List of taxpayers who are ineligible to sign using an electronic signature is updated.
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Form 8879, IRS e-file Signature Authorization is used by taxpayers to authorize an
ERO to enter their PINs on Form 1040 series returns and Form 8878, IRS e-file
Authorization for Application of Extension of Time to File is used by taxpayers to
authorize an ERO to enter their PINs on all extension applications Forms 4868,
2688, and 2350.
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Form 8879, IRS e-file Signature Authorization is also used by taxpayers to sign using
the Practitioner PIN method of electronic signature on Form 1040 series returns.
Form 8878, IRS e-file Authorization for Application of Extension of Time to File is also
used by taxpayers to sign using the Practitioner PIN method of electronic signature
on Form 4868, Application of Extension of Time to File an Individual Income
Tax Return.
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By entering its PIN in the EFIN/PIN field the ERO is attesting to the ERO
Declaration. For returns prepared by the ERO firm the return preparer is declaring
under the penalty of perjury that the return was reviewed and is true, correct, and
complete. For returns prepared by other than the ERO firm, the ERO attests that the
return preparer signed the copy of the return and that the electronic return contains
tax information identical to that contained in the paper return.
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The ERO should check acknowledgement records regularly to identify returns
requiring follow up action.
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Chapter 4 – Transmission
The Transmitter must send the acknowledgment file containing all conditions on accepted
returns, including debt indicator, non-receipt of PIN, etc. to the ERO or Intermediate Service
Provider within two work days of retrieving the acknowledgment file.
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The requirement for a Transmitter participating in Online Filing to not allow more than
five Online returns from the same IP Address within a sixty minute time-frame is eliminated.
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A Transmitter participating in Online Filing must provide the IP Time Zone.
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A transmitter must enter into agreements with companies to allow access to Online Filing
only if companies correctly capture the IP Address of the computer submitting the return
and the date, time, time zone of the computer receiving it.
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The requirement that a Transmitter may not offer, nor in any way participate in or facilitate,
a Refund Anticipation Loan (RAL) in connection with any return filed using Online Filing
was eliminated effective tax year 2001.
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Chapter 5 – Other Authorized IRS e-file Provider Activities
The requirement for an Intermediate Service Provider participating in Online Filing to
ensure that no more than five returns are filed electronically by one taxpayer is corrected
to read “ensure no more than five electronic returns are originated from one software
package or from one e-mail address.”
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The requirement that an Intermediate Service Provider may not offer, nor in any way
participate in or facilitate, a Refund Anticipation Loan (RAL) in connection with any return
filed using Online Filing was eliminated effective tax year 2001.
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Software Developers must ensure their software allows for input of different addresses on
appropriate forms and schedules.
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Chapter 6 – IRS e-file Rules and Requirements
Requirements relating to Refund Anticipation Loans (RALs) also apply to other
financial products that are based on taxpayers’ refunds.
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Information regarding RALs, related fee restrictions, Advertising Standards,
Disclosure of Tax Return Information, and Preparer Penalties is consolidated and
clarified to emphasize the importance of the requirements.
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Providers must advise taxpayers of all fees and other known deductions to be paid from
their refund and the remaining amount the taxpayers will actually receive.
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Advertisements must not imply that Forms W-2, W-2G, and 1099-R are not
needed or that pay stubs or other documentation of earnings can be used to file
individual income tax returns.
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Appendix
Revenue Procedure 2000-31 has been removed from this publication because
it is being revised. It is on the IRS web site and remains in effect.
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The new Revenue Procedure will replace the Revenue Procedure 2000-31 on the
IRS web site after its effective date.
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The Application Process has been removed as the information is now included
in Publication 3112, IRS e-file Application and Participation.
Where to Get Additional Information
The IRS offers a number of ways to find out what you need to know. Below are the
best sources of information for frequently asked questions.
Where can I find the most current information about IRS e-file?
Visit the IRS web site at:
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http://www.irs.gov
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Click on “e-file for Tax Professionals”
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Click on the IRS e-file logo.
How does the IRS keep Authorized
IRS e-file Providers informed of operational issues?
All important operations information is posted to the Electronic Filing Bulletin Board at
859-292-0137 (not toll free).
The IRS also notifies Providers of important information via “QuickAlerts” e-file Messaging
System and the IRS Digital Dispatch. Subscribe to these Services on the IRS web site:
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http://www.irs.gov
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Search and click on “Subscription Services”
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Click on “Subscribe to the QuickAlerts e-file Messaging System” to receive important
e-file messages via fax, e-mail, or telephone.
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Click on “Join the IRS Digital Dispatch” to receive national tax news and information.
Also, click on the “IRS e-News for Tax Professionals” to receive localized information for
tax professionals specifically for your geographic area.
If I get correspondence from the IRS,
who can I call for more information?
All letters from the IRS have a contact telephone number to reach the person best able
to help you with your questions.
Where can I find telephone numbers and addresses
for other services provided by the IRS?
Addresses and telephone numbers may be found in current year tax packages that are
available on the IRS web site.
What is the Refund Hotline number I should give taxpayers so
they can inquire about the status of their individual income tax refunds?
Taxpayers may call 1-800-829-1954 (toll-free), but they may prefer to check the status of their
individual income tax refunds using the “Where’s My Refund” feature on the IRS web site.
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Where can I get information about electronic payment options?
Via the Internet at the IRS web site:
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http://www.irs.gov
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Click on the IRS e-file logo
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Click on “e-file for Tax Professionals”
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Click on “Electronic Payment Options”
Where can I report fraud or suspicious activity I observe?
Any time you observe or become aware of fraud or suspicious activity, report it
to the IRS by calling 1-800-829-0433 (toll-free).
My software doesn’t work, what should I do?
The IRS does not develop or sell tax preparation or electronic return data transmission
software. If you have problems, you should contact the vendor who sold you the software or the technical support operation that comes with the software package.
Where can I get information about
the IRS Nationwide Tax Forums?
Via the Internet at the IRS web site:
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http://www.irs.gov
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Click on “Tax Professionals”
Where can I get more information about filing
both Federal and state individual income tax returns?
Additional information and a list of state e-file contacts are on the IRS web site:
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http://www.irs.gov
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Click on the IRS e-file logo.
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Click on “e-file for Tax Professionals”
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Click on “Federal/State e-file”
Often, the Authorized IRS e-file Provider offering comprehensive one-stop tax
service is the most successful. If you are not participating in Federal/State e-file, you
are missing a golden business opportunity to offer your clients and customers the
benefits and convenience of filing both Federal and state tax returns electronically.
See the Federal/State e-file section in Chapter 2.
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Must Read Information
Publications for
Individual Income Tax Returns
Publication 1345, Handbook for Authorized IRS e-file Providers of Individual
Income Tax Returns, provides rules and requirements for participation in IRS e-file
of Individual Income Tax Returns and related forms and schedules. Violating a
provision of this publication may subject the Provider to sanctions. Providers should
familiarize themselves with both the revenue procedure and Publication 1345 to
ensure compliance with requirements for participation in IRS e-file. Publication
1345 is updated on an as needed basis.
Publication 1345A, Filing Season Supplement for Authorized IRS e-file Providers, is
an important document that is published annually and contains the most current,
up-to-date information regarding IRS e-file of Individual Income Tax Returns and
related forms and schedules. Publication 1345A supplements the revenue procedure
and Publication 1345 with updates, IRS e-file contact information and addresses, a
comprehensive list of Error Reject Code (ERC) Explanations, and Form Field
Exhibits. Publication 1345A is provided annually, prior to the beginning of the filing
season, to Providers in good standing.
Other important publications for participants in IRS e-file include Publication
3112, IRS e-file Application and Participation, and Publication 1346, Electronic Return
File Specifications and Record Layouts for Individual Income Tax Returns. All IRS e-file
publications are available on the IRS web site.
Safeguarding IRS e-file
Safeguarding of IRS e-file from fraud and abuse is the shared responsibility of the IRS
and Authorized IRS e-file Providers. Authorized IRS e-file Providers must be diligent in
recognizing and preventing fraud and abuse in IRS e-file. Neither the IRS nor Providers
benefit when fraud or allegations of abuse tarnish the integrity and reputation of IRS
e-file. Providers appoint an individual as a Responsible Official who is responsible for
ensuring the firm meets IRS e-file rules and requirements. Providers with problems
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Information
involving fraud and abuse may be suspended or expelled from the IRS e-file program,
be assessed civil and preparer penalties or be subject to legal action.
Any time you observe or become aware of suspicious activity, report it to the IRS by
calling 1-800-829-0433 (toll-free).
“Returns Filed” Using IRS e-file
A “return” filed using IRS e-file may be a composite of electronically transmitted
data and certain paper documents or be completely paperless. The paper portion of a
composite return may consist of paper declarations such as Form 8453, U.S. Individual
Income Tax Declaration for an IRS e-file Return, or Form 8453-OL, U.S. Individual
Income Tax Declaration for an IRS e-file Online Return, and other paper documents
that cannot be electronically transmitted and must be mailed to IRS attached to the
applicable Form 8453 (See Chapter 3).
Filing individual income tax returns using IRS e-file is limited to tax returns with
prescribed due dates in the current year. An individual income tax return cannot be
electronically filed after the 15th day of October following the close of that tax year
even if the taxpayer has been granted an extension to file a return beyond that date.
If the 15th day of October falls on a Saturday, Sunday, or legal holiday, the due date
is the next succeeding day which is not a Saturday, Sunday, or legal holiday.
State individual income tax returns that are filed as part of Federal/State e-file become
part of the electronically transmitted data. States often require the submission of paper
documents to complete the return, but they are separate from paper documents for
federal returns. EROs should process State paper documents according to applicable
state rules.
Returns Not Eligible for IRS e-file
The following individual income tax returns and related return conditions cannot
be processed using IRS e-file:
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Other than current year tax returns;
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Tax returns with fiscal year tax periods;
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Amended tax returns;
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Returns containing forms or schedules that cannot be processed by IRS e-file. Publication
1345A, Filing Season Supplement for Authorized IRS e-file Providers of Individual Income Tax
Returns, published in December of each year contains a list of accepted forms and schedules
for the current tax year;
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Tax returns with Taxpayer Identification Numbers (TIN) within the range of 900-00-0000
through 999-99-9999. Exception: Adopted Taxpayer Identification Numbers (ATIN) and
Individual Taxpayer Identification Numbers (ITIN) may fall within the range above. Valid
ATINs contain the digits 93 in the fourth and fifth positions. Valid ITINs contain digits
within a range of 70 through 80 in the fourth and fifth digits. See “Verifying Taxpayer
Identification Numbers” in Chapter 3 for more information on ATINs and TINs; and
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Tax returns with rare or unusual processing conditions or that exceed the specifications for
returns allowable in IRS e-file cannot be processed electronically. These conditions change
from year to year. Your software should alert you to these conditions when they occur. If
electronic return data with one of these conditions is transmitted to the IRS, it will reject
and the tax return must then be filed on paper. The software package documentation or the
software’s support program should provide more specific information.
Submitting a Timely Filed Electronic Tax Return
All prescribed due dates for filing of returns apply to e-file returns. All Authorized IRS e-file
Providers must ensure that returns are promptly processed. However, a Provider that receives
a return for electronic filing on or before the due date of the return must ensure that the
electronic portion of the return is transmitted on or before that due date (including extensions). An electronically filed return is not considered filed until the electronic portion of the
tax return has been acknowledged by the IRS as accepted for processing and a signature for
the return has been received, either electronically or on the appropriate version of Form 8453.
However, if the electronic portion of a composite return is successfully transmitted on or
shortly before the due date and the Provider complies with the requirements for signing the
return, the return will be considered timely filed. The requirements for signing the return
include completing the applicable paper declaration in accordance with its instructions. If the
electronic portion of a return is transmitted on or shortly before the due date and is ultimately
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Chapter
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Information
rejected, but the Provider and the taxpayer comply with the requirements for timely
resubmission of a correct return, the return will be considered timely filed. For additional information about the filing of a return through IRS e-file, see “Submitting the
Electronic Return to the IRS” in Chapter 3.
Transmitters may provide electronic postmarks to taxpayers for individual returns if
the Transmitters adhere to the requirements in Chapter 4. The receipt of an electronic
postmark will provide taxpayers with confidence that they have filed their return timely. The date of the electronic postmark is considered the date of filing when the date of
electronic postmark is on or before the prescribed due date and the return is received
by the IRS after the prescribed due date for filing. All requirements for signing the
return and completing a paper declaration, if required, as well as for timely resubmitting of a rejected timely filed return must be adhered to for the electronic postmark to
be considered the date of filing.
Federal/State e-file
Federal/State e-file is a cooperative tax-filing effort between the IRS and most states.
Authorized IRS e-file Providers may file both Federal and state returns electronically
for clients and customers. In addition to accepting Federal and state individual income
tax returns electronically in a single transmission, State Only returns may be accepted
and forwarded to the State Retrieval System. A State Only return may be accepted if,
1) a state return was previously rejected by the state; 2) the state return is originated
separately from the Federal return; 3) part-year residency return, 4) non-resident state
return; or, 5) married filing separately state return but filing joint Federal return.
Adding Federal/State e-file to your business is very similar to the process you went
through to become an Authorized IRS e-file Provider. Refer to Publication 3112,
IRS e-file Application and Participation for further details. Also contact the state
coordinators for the state programs in which you will be participating for further
explanation of state rules and requirements.
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Chapter
3
Electronic Return Origination
Obtaining, Handling, and Processing
Return Information from Taxpayers
An ERO originates the electronic submission of returns it either prepares or collects
from taxpayers wishing to have their returns e-filed. The ERO must always identify the
paid preparer (if any) in the appropriate field of the electronic record of returns it originates. EROs may either transmit returns directly to the IRS or arrange with another
Provider to transmit the electronic return to the IRS. An Authorized IRS e-file Provider,
including an ERO may disclose tax return information to other Providers for the purpose of preparing a tax return under Section 301.7216. For example, an ERO may pass
on return information to an Intermediate Service Provider or a Transmitter for the
purpose of having an electronic return formatted or transmitted to the IRS.
An ERO that chooses to originate returns that it has not prepared, but only collected,
becomes an income tax return preparer of the returns when, as a result of entering the
data, it discovers errors that require substantive changes and then makes the changes. A
nonsubstantive change is a correction limited to a transposition error, misplaced entry,
spelling error, or arithmetic correction. All other changes are considered substantive
and the ERO becomes an income tax return preparer. As such, the ERO may be
required to sign the tax return as the income tax return preparer.
Safeguarding IRS e-file From Fraud and Abuse
While all Authorized IRS e-file Providers must be on the lookout for fraud and abuse
in IRS e-file, EROs must be particularly diligent while acting in their capacity as the
first contact with taxpayers filing a return. An ERO should always seek to recognize
and prevent fraud and abuse of IRS e-file. An ERO should exercise due diligence in the
preparation of returns involving the Earned Income Tax Credit (EITC), as it is a popular target for fraud and abuse. Section 6695(g) of the Internal Revenue Code requires
paid preparers to exercise due diligence in the preparation of returns involving EITC.
Be sure to complete all required worksheets and meet all record keeping requirements.
A potentially abusive return is a return that is not fraudulent, is required to be filed by
the taxpayer, but contains inaccurate information that may lead to an understatement
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of a liability or the overstatement of a credit resulting in a refund to which the taxpayer
may not be entitled. Indicators of an abusive or fraudulent return include unsatisfactory answers to filing status questions, multiple returns with same address, and missing
or incomplete Schedules A and C income and expense documentation.
Verifying Taxpayer Identification Numbers
To safeguard IRS e-file from fraud and abuse an ERO should confirm identities and
TINs of taxpayers, spouses, and dependents listed on returns prepared by its firm. TINs
include SSNs, EINs, Adopted Taxpayer Identification Numbers (ATIN), and Individual
Taxpayer Identification Numbers (ITIN). To confirm identities an ERO might ask taxpayers not known to them to provide two forms of identification (picture IDs are
preferable) that include the taxpayer’s name and current address. Also, seeing Social
Security cards and other documents will avoid including incorrect TINs for taxpayers,
spouses, and dependents on returns. Care should be taken to ensure that all TINs are
transcribed correctly. The TIN entered in the Form W-2 of the electronic return record
must be identical to the TIN on the version provided by the taxpayer. The TIN on the
Form W-2 should be identical to the TIN on the electronic return unless otherwise
allowed by the IRS. Incorrect TINs, using the same TIN on more than one return or
associating the wrong name with a TIN cause the largest number of returns to reject
(see Acknowledgments of Transmitted Return Data in this chapter).
Additionally, the TINs for taxpayers, spouses, and dependents are identified by a Name
Control. A Name Control is the first four significant letters of an individual taxpayer’s
last name as recorded by the Social Security Administration (SSA) or the first four letters/numbers of a business name. Having the wrong Name Control associated with a
taxpayer’s TIN contributes to a large portion of TIN-related rejects. The most common
example for a return rejecting due to a mismatch between a taxpayer’s TIN and Name
Control involves newly married taxpayers. Typically, the taxpayer may file using a correct SSN along with the name used in the marriage, but the taxpayer has failed to
update the records with the SSA to reflect a name change. To minimize TIN-related
rejects, it is important to verify taxpayer TINs and Name Control information prior to
submitting electronic return data to the IRS.
14
Be Aware of Non-standard Information Documents
The IRS has identified questionable Forms W-2 as a key indicator of potentially abusive and
fraudulent returns (see “Safeguarding IRS e-file From Fraud and Abuse”). Be on the lookout
for suspicious or altered Forms W-2, W-2G, and 1099-R and forged or fabricated documents.
Always enter the “non-standard form” code in the electronic record of individual income tax
returns for Forms W-2, W-2G or 1099-R that are altered, handwritten or typed. An alteration
includes any pen and-ink change. The information must never be altered after the forms are
given to the ERO.
Any time you observe or become aware of questionable Forms W-2, report it to the IRS as
detailed on the IRS web site or by calling 1-800-829-0433 (toll-free).
Be Careful with Addresses
Addresses on Forms W-2, W-2G or 1099-R; Schedule C or C-EZ; or on other tax forms
supplied by the taxpayer that differ from the taxpayer’s current address must be input into
the electronic record of the return. Addresses that differ from the taxpayer’s current address
must be input even if the addresses are old or if the taxpayer has moved. EROs should inform
taxpayers that the address on the first page of the return, once processed by the IRS, will be
used to update the taxpayer’s address of record. The IRS uses a taxpayer’s address-of-record
for various notices that are required to be sent to a taxpayer’s “last known address” under the
Internal Revenue Code and for refunds of overpayments of tax (unless otherwise specifically
directed by taxpayers, such as by Direct Deposit).
Finally, an ERO’s address must never be put in fields reserved for taxpayers’ addresses in the
electronic return record or on Form 8453. The only exceptions are if the ERO is the taxpayer
or the address of a power of attorney for the taxpayer for the tax return is the same as the
address of the ERO.
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Avoiding Refund Delays
EROs should advise taxpayers that they can avoid refund delays by having all of their
taxes and obligations paid, providing current and correct information to the ERO,
ensuring that all bank account information is up-to-date, ensuring that their Social
Security Administration records are current, and carefully checking their tax return
information before signing the return.
EROs can do a number of things for clients and customers to avoid rejects and refund
delays. Here are some suggestions:
■
Insist on identification and documentation of social security and other identification
numbers for all taxpayers and dependents;
■
Exercise care in the entry of tax return data into tax return preparation software and
carefully check the tax return information before signing the tax return;
■
Avoid taxpayers who insist on claiming dubious items on tax returns or present
altered or suspicious documents;
■
Ask taxpayers if there were problems with last year’s refund; if so, see if the conditions
that caused the problems have been corrected or can be avoided this year; and
■
Keep track of client issues that result in refund delays and analyze for common
problems; counsel taxpayers on ways to address these problems.
Refund Returns
When taxpayers are entitled to refunds, Providers should inform taxpayers that they
have several options. An individual income tax refund may be applied to next year’s
estimated tax; received as a Direct Deposit or paper check; or be split so that a portion
is applied to next year’s estimated tax and the rest received as a Direct Deposit or
paper check.
16
Direct Deposit of Refunds
Taxpayers often elect the Direct Deposit option because it is the fastest way of receiving
refunds. Providers must accept any Direct Deposit election to any eligible financial institution designated by the taxpayer. Refunds may be designated for Direct Deposit to qualified
accounts in the taxpayer’s name. Qualified accounts include savings, checking, share draft, or
consumer asset accounts (for example, IRA or money market accounts). Refunds may not be
designated for Direct Deposit to credit card accounts. Qualified accounts must be held by
financial institutions within the United States and established primarily for personal, family,
or household purposes. Qualifying institutions may be national banks, state banks (including
the District of Columbia and political sub-divisions of the 50 states), savings and loan associations, mutual savings banks, and credit unions.
Taxpayers should be cautioned that some financial institutions do not permit the deposit of
joint individual income tax refunds into individual accounts. The IRS is not responsible if
Direct Deposits are refused for this reason. Check or share draft accounts that are “payable
through” another institution may not accept Direct Deposits. Taxpayers should verify their
financial institution’s Direct Deposit policy before they elect the Direct Deposit option.
Taxpayers who choose Direct Deposit must provide Providers with account numbers and
routing numbers for qualified accounts. The annual tax packages show how to find and
identify these numbers. This information is best obtained from official financial institution
records, account cards, checks or share drafts that contain the taxpayer’s name and address.
The sole exception involves accounts specifically created to receive refunds that repay Refund
Anticipation Loans (RAL) and other refund products offered by financial institutions. In
those cases Providers may supply the identifying account data.
Additionally, a Provider must never charge a separate fee for Direct Deposit and must accept
any Direct Deposit election by a taxpayer to any eligible financial institution. The Provider
must advise the taxpayer that a Direct Deposit election cannot be rescinded and that changes
cannot be made to routing numbers of financial institutions or to the taxpayer’s account
numbers after IRS has accepted the return. The Provider must not alter the Direct Deposit
information in the electronic record after taxpayers have signed the tax return. Providers with
repeat customers or clients should check to see if taxpayers have new accounts. Some software
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stores last year’s information and reuses it unless it is changed. Taxpayers will not
receive Direct Deposit of their refunds if account information is not updated to reflect
current information.
Refunds that are not Direct Deposited because of institutional refusal, erroneous
account or routing numbers, closed accounts, bank mergers, or any other reason will
be issued as paper checks, resulting in refund delays of up to ten weeks. While the IRS
will ordinarily process a request for Direct Deposit, it reserves the right to issue a paper
check and does not guarantee a specific date by which the refund will be deposited into
the taxpayer’s account. Treasury’s Financial Management Service (FMS) issues Federal
income tax refunds and offsets taxpayers’ refunds to pay off past-due child support or
Federal agency debts such as student loans. Neither the IRS nor FMS is responsible for
the misapplication of a Direct Deposit that is caused by error, negligence, or malfeasance on the part of the taxpayer, Authorized IRS e-file Provider, financial institution,
or any of their agents.
Balance Due Returns
Taxpayers who owe additional tax must pay their balances due by the original due date
of the return or be subject to interest and penalties. An extension of time to file may be
filed electronically by the original return due date, but it is an extension of time to file
the return, not an extension of time to pay a balance due. Providers should inform taxpayers of their obligations and options for paying balances due. Taxpayers have several
choices when paying any taxes owed on their returns as well as estimated tax payments.
Electronic Funds Withdrawal
Taxpayers can e-file and, at the same time, authorize an electronic funds withdrawal.
Taxpayers who choose this option must provide account numbers and routing transit
numbers for qualified savings, checking or share draft accounts to the Authorized IRS
e-file Provider. The IRS tax return instructions describe how to find and identify these
numbers. This information is best obtained from official financial institution records,
account cards, checks or share drafts that contain the taxpayer’s name and address.
18
Providers should caution taxpayers to ensure, before they e-file, that their financial institution
allows electronic funds withdrawal requests from the designated account. Payments cannot be
authorized for this purpose from some credit union share accounts.
Taxpayers can schedule the payment for withdrawal on a future date. Scheduled payments
must be effective on or before the return due date. For example, the Provider may transmit an
individual income tax return in March and the taxpayer can specify that the withdrawal be
made on any day on or before the return due date. The taxpayer does not have to remember to
do anything at a later date. For returns transmitted after the due date, the payment date must
be the same as the date the return is transmitted. Electronic Funds Withdrawal payments must
be authorized at the time the balance due return or form is e-filed.
Payments can be made by electronic funds withdrawal for the following:
■
Current year Form 1040 series return;
■
Form 4868, Application for Automatic Extension of Time to File U.S. Individual
Income Tax Return;
■
Form 2350, Application for Extension of Time to File for U.S. Citizens and
Resident Aliens Abroad Who Expect to Qualify for Special Treatment; and
■
Form 1040-ES, Estimated Tax for Individuals. Only one estimated tax payment
can be made at the time that the Form 1040 is electronically filed.
Providers should be careful to ensure that all the information needed for the electronic funds
withdrawal request is included with the return. Taxpayers must provide all of the following:
■
Routing transit number (RTN);
■
Account number;
■
Type of account (checking or savings);
■
Date of scheduled electronic funds withdrawal (if applicable); and
■
Amount of the withdrawal.
If taxpayers do not provide all of the needed information, Providers must contact the taxpayers. If the Provider is unsuccessful in obtaining the electronic funds withdrawal information
but the returns are otherwise complete, the Provider should proceed with the origination of
the electronic return data to the IRS. The Provider must notify the taxpayer(s) in writing that
other arrangements must be made to pay the balance due.
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Credit Card Payments
Taxpayers may also pay electronically using a credit card. Credit card payments can
be made when e-filing or separately via telephone or the Internet.
■
Integrated e-file and e-pay: Taxpayers can e-file and, at the same time, pay the
balance due by credit card if the tax software used includes this option. Taxpayers
who choose this option must provide Providers with the credit card number, expiration date, and possibly, the cardholder’s address information. The credit card service
provider will charge the taxpayer a convenience fee based on the amount of the tax
payment. Taxpayers should be informed of the convenience fee before the return
is filed. Providers should caution taxpayers to ensure, before they e-file, that the
necessary line of credit is available.
■
Pay by Phone or Internet: Taxpayers may pay a balance due by phone or the
Internet using a major credit card (American Express® Card, Discover® Card,
MasterCard®, or Visa®card). This service is available through credit card service
providers. The service providers charge a convenience fee based on the amount of
the tax payment. Taxpayers will be advised of the fee during the transaction and
can choose to end the transaction before the payment is completed and confirmed.
EROs should inform taxpayers of this option and advise them that fees may vary
between service providers.
Payments can be made by phone or the Internet via credit card for the following:
■
Current year Form 1040 series returns, including balance due notices;
■
Prior year Form 1040 series returns (applies to past due payments where no
Installment Agreement);
■
Form 4868, Application for Automatic Extension of Time to File U.S. Individual
Income Tax Return;
20
■
Form 1040-ES, Estimated Tax for Individuals; and
■
Installment Agreement payments.
Electronic Federal Tax Payment System (EFTPS)
Taxpayers can pay balances due and estimated taxes year round using the Electronic Federal
Tax Payment System (EFTPS). Taxpayers enroll in EFTPS-OnLine via an official government
site on the Internet, using a user-friendly Web interface. After enrollment, taxpayers receive
a confirmation package by mail with instructions. For added security, a unique Personal
Identification Number (PIN) is mailed separately to the taxpayers. To make payments on-line,
taxpayers will need the PIN an Internet password. Taxpayers can refer to the confirmation
package for instructions on obtaining an Internet password.
Pay by Check
Taxpayers may pay the balance due by mailing a check accompanied by Form 1040-V,
Payment Voucher. These forms are found in many individual income tax return packages.
Authorized IRS e-file Providers must supply Form 1040-V to taxpayers, if needed, and help
them identify the correct mailing address from the chart on the back of the form. Vouchers
do not have to be mailed at the same time the electronic return is transmitted. For example,
the return may be transmitted January and the taxpayer may mail the payment and voucher
at any time on or before the return due date.
Installment Agreement Requests
Taxpayers who cannot pay the amount they owe for Form 1040 series returns may submit
Form 9465, Installment Agreement Request, to the IRS. Form 9465 may be transmitted electronically (if supported by software) with the taxpayer’s electronic return data, or it may be
submitted later, either electronically or on paper. If accepted, the IRS charges a user fee for
setting up the installments.
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Signing an Electronic Tax Return
As with an income tax return submitted to the IRS on paper, an electronic income
tax return must be signed by the taxpayer as well as by the paid preparer if applicable.
Taxpayers may sign individual income tax returns either electronically or on a paper
declaration. There are currently two methods for signing individual income tax
returns electronically (see “Electronic Signatures for Taxpayers”, below).
Whether using a paper or electronic signature, taxpayers must sign and date the
Declaration of Taxpayer to authorize the origination of the electronic submission
of the return to the IRS prior to the transmission of the return to IRS. The Declaration
of Taxpayer includes the taxpayer’s declaration under penalties of perjury that the
return is true, correct, and complete, as well as the taxpayers’ Consent to Disclosure.
The Consent to Disclosure authorizes the IRS to disclose information to the taxpayers’
Authorized IRS e-file Providers. Intermediate Service Providers, Transmitters, and EROs
are authorized by taxpayers to receive from the IRS an acknowledgement of receipt or
reason for rejection of the electronic return, an indication of any refund offset, the
reason for any delay in processing the return or refund and the date of the refund.
Taxpayers must sign a new declaration if the electronic return data on individual
income tax returns is changed after taxpayers signed the Declaration of Taxpayer and
the amounts differ by more than either $50 to “Total income” or “AGI,” or $14 to
“Total tax,” “Federal income tax withheld,” “Refund,” or “Amount you owe.”
Electronic Signatures for Taxpayers
There are two methods of signing individual income tax returns with an electronic
signature available for use by taxpayers. Both methods allow taxpayers to use a Personal
Identification Number (PIN) to sign the return and the Declaration of Taxpayer.
One method is referred to as Self Select PIN. The Self-Select PIN method requires
taxpayers to provide their prior year Adjusted Gross Income (AGI) amount for use
by the IRS to authenticate the taxpayers. When taxpayers sign using the Self-Select
method and enter their PIN directly in the electronic return, signature documents are
not required.
22
The other method is referred to as the Practitioner PIN and does not require the taxpayer
to provide their prior year AGI amount. A signature authorization form must be completed
when using the Practitioner PIN method (see “IRS e-file Signature Authorization”, later).
Regardless of the method of electronic signature used, taxpayers may enter their PIN in the
electronic return. The ERO may select, or the software may generate, the taxpayer’s PIN if the
taxpayer agrees by signing an IRS e-file signature authorization containing the PIN.
When taxpayers sign using the Self-Select method and enter their PIN directly in the electronic return, signature documents are not required. In all other instances, taxpayers must sign
signature authorization forms. The Practitioner PIN method also requires use of the signature
authorization forms (see “IRS e-file Signature Authorization”, later).
The following taxpayers are ineligible to sign individual income tax returns with an electronic
signature using either the Self-Select PIN or Practitioner PIN method:
■
Taxpayers who filed Form 1040-NR or 1040-SS the prior tax year; and
■
Taxpayers required to file the following forms, which must be attached to Form 8453, U.S.
Individual Income Tax Declaration for an IRS e-file Return or Form 8453 OL, U.S. Individual
Income Tax Declaration for an IRS e-file Online Return:
■
Form 3115, Application for Change in Accounting Method;
■
Form 3468, Investment Credit, Historic Structure Certificate;
■
Form 5713, International Boycott Report;
■
Form 8283, Non-Cash Charitable Contribution, Section B Appraisal Summary;
■
Form 8332, Release of Claim to Exemption for Children of Divorced or Separated Parents;
■
Form 8858, Information Return of U.S. Persons With Respect To Foreign Disregarded Entities;
or
■
Form 8885, Health Coverage Tax Credit.
The following taxpayers are also ineligible to sign individual income tax returns with the
Self-Select PIN method, but can use the Practitioner PIN method:
■
Primary taxpayers under age sixteen who have never filed; and
■
Secondary taxpayers under the age sixteen who did not file the prior tax year.
If the taxpayer is ineligible to use an electronic signature or chooses not to do so, a signature
on a paper declaration must be completed (see “Paper Signatures”, later).
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IRS e-file Signature Authorization
In some instances, taxpayers may wish to sign electronically, but are unable to
enter their PIN directly in the electronic return. Taxpayers authorize the ERO to enter
their PINs in the electronic return record by completing the appropriate IRS e-file
signature authorization form. Form 8879, IRS e-file Signature Authorization authorizes
an ERO to enter PINs on Individual Income Tax Returns and Form 8878, IRS e-file
Authorization for Application of Extension of Time to File authorizes an ERO to enter
their PINs on Forms 4866, 2688, and 2350.
The ERO may enter the taxpayers’ PINs in the electronic return record before the
taxpayers sign Form 8879 or 8878, but the taxpayers must sign and date the appropriate form before the ERO originates the electronic submission of the return. In most
instances, the taxpayer must sign and date the Form 8879 or Form 8878 after reviewing
the return and ensuring the tax return information on the form matches the information on the return.
Taxpayers who provide a completed tax return to an ERO for electronic filing may
complete the IRS e-file Signature Authorization without reviewing the return originated by the ERO. The line items from the paper return must be entered on the applicable
Form 8879 or Form 8878 prior to the taxpayers sign and date the form. The ERO may
use these pre-signed authorizations as authority to input the taxpayer’s PIN only if the
information on the electronic version of the tax return agrees with the entries from
the paper return.
Taxpayers and the ERO representative must always complete and sign Forms 8879 or
8878 for the Practitioner PIN method of electronic signature. Taxpayers may use the
Practitioner PIN Method to electronically sign Form 4868 if a signature is required. A
signature is only required for Form 4868 when an electronic funds withdrawal is also
being requested.
The ERO must retain Forms 8879 and 8878 for three years from the return due date
or the IRS received date, whichever is later. EROs must not send Forms 8879 and 8878
to the IRS unless the IRS requests they do so.
24
Electronic Signatures for EROs
If taxpayers sign returns using either of the electronic signature methods, the ERO must
also sign with a PIN. EROs should use the same PINs for the entire tax year. The PIN may be
manually input or software generated in the electronic record in the location designated for
the ERO EFIN/PIN. The ERO is attesting to the ERO Declaration by entering a PIN in the
EFIN/PIN field. For returns prepared by the ERO firm the return preparer is declaring under
the penalties of perjury that the return was reviewed and is true, correct, and complete. For
returns prepared by other than the ERO firm that originates the electronic submission, the
ERO attests that the return preparer signed the copy of the return and that the electronic
return contains tax information identical to that contained in the paper return. The paid
preparer’s identifying information (e.g. name, address, and SSN or PTIN) must also be
entered in the e-file return.
Paper Signatures
If providing the signature on a paper declaration, Form 8453, U.S. Individual Income Tax
Declaration for an IRS e-file Return, must be completed and signed before the electronic data
portion of the return is submitted. A substitute Form 8453 requires approval from the IRS
prior to its use. The taxpayer’s (and spouse’s in the case of a joint return) name, address, social
security number, and tax return information in the electronic transmission must be identical
to the information on the Form 8453 that the taxpayer signed and provided for submission to
the IRS. The form must be signed by both the taxpayer (and spouse in the case of a joint
return) and the ERO.
■
Taxpayer(s)— The taxpayer must sign and date the “Declaration of Taxpayer” section and
check the correct box after thoroughly reading the declaration. The taxpayer must verify the
information on the electronic portion of the return and on Form 8453. The taxpayer may verify the information on the electronic portion of the return by viewing this information on a
computer display terminal. A taxpayer need not verify the electronic portion of the return
prior to its transmission if the taxpayer provided a completed paper return for filing and the
information on the electronic portion is identical to the information provided by the taxpayer.
■
ERO— The ERO must sign and complete all the requested information in the “Declaration
of Electronic Return Originator (ERO) and Paid Preparer” section after thoroughly reading
the declaration. An ERO may authorize members of its firm or designated employees to sign
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for the ERO, but the ERO is still responsible for all electronically filed returns originated by its firm. EROs do not have to disclose their EIN or SSN on the copies they supply
to taxpayers.
■
Paid Preparer— If the return was prepared for a fee, the paid preparer must also
sign the Form 8453. If the paid preparer signs as or for the ERO, the preparer should
check the “Also the Paid Preparer” box and not complete the “Paid Preparer’s Use
Only” section. Paid preparers do not have to disclose their SSNs or EINs on the copies
they supply to taxpayers. If a taxpayer gives the ERO a return already prepared by a
paid preparer who did not sign the Form 8453, the ERO must attach a copy of pages
1 and 2 of the return that contains the paid preparer’s signature to the Form 8453.
Write Copy—Do Not Process on both pages.
■
Volunteer Program Sponsor— Unpaid preparers in IRS Sponsored programs
including Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly
(TCE), Outreach, and Taxpayer Assistance Centers in IRS offices must identify themselves or the volunteer program on Form 8453. Sponsors are not required to sign
Forms 8453 as EROs, but may do so. Sponsors that choose not to sign as an ERO
must include in the ERO declaration, the volunteer organization name or acronym,
and if operating at multiple sites, the site designation number.
■
Employer Offering IRS e-file as an Employee Benefit— Employers are not
required to sign Form 8453 as EROs, but may do so. Employers that choose not to sign
as EROs must include in the ERO declaration their name, address, the designation
“Employee Benefit”, and, if operating at multiple sites, the site designation number.
Sending Paper Signatures to the IRS
After electronic return data is acknowledged as accepted (See “Acknowledgments
of Transmitted Return Data”), EROs must mail within three business days the corresponding Forms 8453, with other required forms to the IRS. Forms W 2, W-2G and
1099-R should not be sent to the IRS. If an electronic signature was used in signing the
document and was accepted, a Form 8453 is not used and is not submitted to the IRS
(see “Electronic Signatures”, above). See Publication 1345A for the current mailing
address. As a composite tax return is not considered filed until the Forms 8453 are
received by the IRS, EROs who are lax, negligent or untimely in mailing Forms 8453 to
the IRS may be sanctioned.
26
The IRS corresponds with EROs when Forms 8453 are not received or are otherwise
determined to be missing or incomplete. EROs must supply replacements, complete with
attachments. If EROs do not send replacement Forms 8453, complete with attachments,
when requested, the IRS will contact the taxpayers to obtain them. This does not apply to
returns that were electronically signed by the taxpayer.
Submitting the Electronic Return to the IRS
An ERO must originate the electronic submission of a return as soon as possible after it is
signed. Individual income tax returns must not be electronically filed prior to the ERO’s
receipt of Forms W-2, W-2G, or 1099-R. If the taxpayer is unable to secure and provide a
correct Form W-2, W-2G, or 1099-R, the return may be electronically filed after Form 4852
is completed in accordance with the use of that form. If Form 4852 is used, the non-standard
W-2 indicator must be included in the record and the Form 4852 must be retained by the
ERO in the same manner required for Forms W-2, W-2G, and 1099-R.
An ERO must ensure that stockpiling of returns does not occur at its offices. Stockpiling refers
to either collecting returns from taxpayers or from another Authorized IRS e-file Provider
prior to official acceptance in IRS e-file. Or, after official acceptance to participate in IRS e-file,
stockpiling refers to waiting more than three calendar days to submit the return to the IRS
once the ERO has all necessary information for origination. Returns that are held prior to the
date that electronic returns may be transmitted to the IRS are not considered stockpiled. EROs
must advise taxpayers that returns will not be transmitted to the IRS until electronic returns
may be transmitted.
Submission of Paper Documents to the IRS
IRS e-file returns must contain all the same information as returns filed completely on paper.
EROs are responsible for ensuring that all paper documents required to complete the filing
of returns are submitted to the IRS. Attach all appropriate supporting documents that must
be submitted to the IRS (such as a supporting Form 8332, Release of Claim to Exemption for
Child of Divorced or Separated Parents) to the Form 8453 and send them to the IRS. EROs
must sign and ensure the accuracy of the Form 8453. State income tax returns in the
Federal/State Program often require that paper documents be prepared and forwarded to
state tax administration agencies. Be sure to follow each state’s rules when state income tax
returns are prepared.
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ERO Duties After
Submitting the Return to the IRS
Record Keeping and Documentation Requirements
EROs must retain and make available to the IRS upon request, until the end of
the calendar year in which a return was filed, the following material at the business
address from which the return was originated. An ERO may retain the required
records at the business address of the Responsible Official during any period of
time the office is closed.
■
A copy of signed Form 8453, any supporting documents that are not included in
the electronic return data and copies of Forms W-2, W-2G, and 1099-R;
■
A copy of signed IRS e-file consent to disclosure forms for taxpayers who signed
using an electronic signature;
■
A complete copy of the electronic portion of the return that can be readily and
accurately converted into an electronic transmission that the IRS can process; and
■
The acknowledgment file for IRS accepted returns.
Forms 8879 and 8878 must be available to the IRS in the same manner described
above, for three years from the due date of the return or the IRS received date,
whichever is later.
EROs may electronically image and store all paper records they are require to retain
for IRS e-file. This includes signed Forms 8453 and paper copies of Forms W-2,
W-2G, and 1099-R as well as any supporting documents not included in the electronic
record and Forms 8879 and 8878. The storage system must satisfy the requirements
of Revenue Procedure 97-22, Retention of Books and Records. In brief, the electronic
storage system must ensure an accurate and complete transfer of the hard copy to the
electronic storage media. All records must be able to be reproduced with a high degree
of legibility and readability (including the taxpayers’ signatures) when displayed on a
video terminal and when reproduced in hard copy.
28
Providing Information to the Taxpayer
The ERO must provide a complete copy of the return to the taxpayer. However, the copy need
not contain the social security number of the paid preparer. A complete copy of a taxpayer’s
return includes Form 8453 and other documents that cannot be electronically transmitted,
when applicable, as well as the electronic portion of the return. The electronic portion of the
return can be contained on a replica of an official form or on an unofficial form. However, on
an unofficial form, data entries must be referenced to the line numbers or descriptions on an
official form. If the taxpayer provided a completed paper return for electronic filing and the
information on the electronic portion of the return is identical to the information provided by
the taxpayer, a printout of the electronic portion of the return does not have to be provided to
the taxpayer. The ERO should advise the taxpayer to retain a complete copy of the return and
any supporting material. The ERO should also advise the taxpayer that an amended return, if
needed, must be filed as a paper return and mailed to the submission processing center that
would handle the taxpayer’s paper return. Refer to the current year’s tax package for addresses.
Acknowledgments of Transmitted Return Data
The IRS electronically acknowledges the receipt of all transmissions. Returns in each transmission are either accepted or rejected for specific reasons. Accepted returns meet the processing
criteria and are considered “filed” as soon as the return is signed electronically or through the
receipt by the IRS of a paper signature. Rejected returns fail to meet processing criteria and are
considered “not filed”. The acknowledgment identifies the source of the problem using a system of error reject codes and form field numbers (sequence numbers). The error reject codes
tell why the return rejected and the form field numbers tell which fields of the electronic
return data are involved. Publication 1345A, Filing Season Supplement for Authorized IRS e-file
Providers is issued annually and contains information to help identify the cause of the reject.
The acknowledgement record of an accepted individual income tax return contains other
information that is useful to the originator. The record confirms if the IRS accepted a PIN, if
the taxpayer’s refund will be applied to a debt, if an elected electronic funds withdrawal paid a
balance due, and if the IRS approved a request for extension on Form 2688. The ERO should
check acknowledgement records regularly to identify returns requiring follow up action. The
ERO should take reasonable steps to address issues identified on acknowledgement records.
For example, if the IRS does not accept a PIN of an individual income tax return, the ERO
must provide a completed and signed Form 8453 for the return.
29
Chapter
3
Electronic
Return
Origination
The ERO must, at the request of the taxpayer, provide the Declaration Control Number
(DCN) and the date the electronic individual income tax return data was accepted by
the IRS. Form 9325, Acknowledgment and General Information for Taxpayers Who File
Returns Electronically, may be used for this purpose. The ERO must also, if requested,
supply the electronic postmark if the Transmitter provided one for the return.
Rejected electronic individual income tax return data can be corrected and retransmitted without new signatures or authorizations if changes do not differ from the amount
in the electronic portion of the electronic return by more than $50 to “Total income”
or “AGI”, or more than $14 to “Total tax,” “Federal income tax withheld,” “Refund,” or
Amount you owe”. Taxpayers must be given copies of the new electronic return data. If
new signatures are required, the taxpayer must be given copies of the new signatures.
In the Federal/State e-file Program, if Federal electronic return data rejects due to
errors, the state electronic return data also rejects. The converse is also true. That is,
if the state electronic return data is rejected by the IRS because of error, the Federal
electronic return data also rejects. Once both the Federal and state electronic return
data is accepted by the IRS, the subsequent rejection of state electronic return data
by a state tax administration agency will not impact the accepted Federal electronic
return data. States determine when state electronic return data received from the
Federal/State e-file Program is accepted as filed. Contact the state tax administration
agency when problems or questions arise.
Resubmission of Rejected Tax Returns
If the IRS rejects the electronic portion of a taxpayer’s individual income tax return
for processing and the reason for the rejection cannot be rectified, the ERO must take
reasonable steps to inform the taxpayer of the rejection within 24 hours. When the
ERO advises the taxpayer that the return has not been filed, the ERO must provide the
taxpayer with the reject code(s) accompanied by an explanation. If the taxpayer
chooses not to have the electronic portion of the return corrected and transmitted to
the IRS or if it cannot be accepted for processing by the IRS, the taxpayer must file a
paper return. In order to be filed timely, the paper return must be filed by the later of
the due date of the return or ten calendar days after the date the IRS gives notification
that the electronic portion of the return is rejected or that it cannot be accepted for
processing. The paper return should include an explanation of why the return is being
filed after the due date.
30
Advising Taxpayers about Refund Inquiries
EROs should tell taxpayers how to follow up on returns and refunds by pointing out the
“Where’s My Refund” feature on the IRS web site. If taxpayers do not have access to the Internet,
the ERO should provide taxpayers with the Refund Hotline information. The Refund Hotline
number is 1-800-829-1954 (toll-free) and will have information about taxpayers’ refunds (when
it becomes available).
To call the Refund Hotline, taxpayers will need to enter the first Social Security Number shown
on their tax return, the filing status, and the exact amount of the refund in whole dollars. Before
checking on refunds, taxpayers should wait at least three weeks from the time the return data is
acknowledged as accepted. Because refund information is updated each weekend, taxpayers should
be advised not to call more than once a week. This will save taxpayers from checking on their
refunds with no possibility of success.
Refund Delays
Taxpayers often ask EROs to help them when refunds take longer than expected. Refunds may
be delayed for a number of reasons, including the following:
■
Errors in Direct Deposit information (refunds will then be sent by check);
■
Financial institution refusals of Direct Deposits (refunds will then be sent by check) or delays
in crediting the Direct Deposit to the taxpayer’s account;
■
Estimated tax payments differ from amount reported on tax return (for example, fourth
quarter payments not yet on file when return data is transmitted);
■
Bankruptcy;
■
Inappropriate claims for the Earned Income Tax Credit; or
■
Recertifications to claim the Earned Income Tax Credit.
Taxpayers will receive a letter or notice explaining the issue(s) and how to resolve the issue(s). The letter or notice will contain the contact telephone number that the taxpayer can use for further assistance.
If taxpayers’ refunds are lost or misapplied, taxpayers do not receive notices or letters, or there is no
information on the Refund Hotline (see “Advising Taxpayers about Refund Inquiries”, above), advise
taxpayers to call the IRS Tax Help number listed in tax packages.
31
Chapter
3
Electronic
Return
Origination
Refund Offsets
The IRS offsets as much of a refund as is needed to pay off overdue taxes owed by
taxpayers and notifies them when this occurs. The Financial Management Service
(FMS) offsets taxpayers’ refunds to pay off past-due child support or Federal agency
debts such as student loans. Offsets to non-tax debts occur after the IRS has certified
the refunds to FMS for payment but before FMS makes the Direct Deposits or issues
the paper checks. Refund offsets reduce the amount of the expected Direct Deposit or
paper check but they do not delay the issuance of the remaining refund (if any) after
offset. If taxpayers owe non-tax debts they may contact the agency they owe, prior to
filing their returns, to determine if their debts were submitted for refund offset. If the
IRS determines at time the return is filed that refunds will be offset, a Debt Indicator
is provided on the Acknowledgement File. FMS sends taxpayers offset notices if any
part of their refund is applied to non-tax debts. Taxpayers should contact the agencies
identified in the FMS offset notice when offsets occur if they dispute the non-tax
debts or have questions about the offsets. If a refund is in a joint name but only one
spouse owed the debt, the “injured spouse” should file Form 8379, Injured Spouse
Claim and Allocation.
Other EROs
IRS Sponsored Programs
Often individuals or organizations serve as unpaid preparers in IRS sponsored
programs including Volunteer Income Tax Assistance (VITA), Tax Counseling for
the Elderly (TCE), Outreach, and Taxpayer Assistance Centers in IRS offices. For IRS
sponsored programs, unless otherwise noted, all requirements of an Authorized
IRS e-file Provider apply. A manual or electronic quality review system is required to
review each electronically filed return. The IRS may designate an individual for this
purpose. The IRS will advise the VITA or TCE sponsor how to submit or transmit
returns. Some options available to the IRS include:
■
Submission of returns by VITA or TCE sponsors on paper, magnetic disk, or in an
electronic transmission to a designated IRS office;
32
■
Submission of returns by VITA or TCE sponsors via direct transmission to the IRS; or
■
Submission of returns by VITA or TCE sponsors through a third party transmitter.
A VITA or TCE sponsor can only accept a return for electronic filing that meets the criteria
for VITA or TCE assistance. Only the returns and accompanying forms and schedules included
in a VITA or TCE training course may be accepted for electronic filing by a VITA or TCE
sponsor. A VITA or TCE sponsor may collect a fee only if it is that is directly related to defraying the actual cost of electronically transmitting a tax return. A VITA or TCE sponsor may
also collect this fee on behalf of a third party Transmitter that electronically transmitted a
VITA or TCE return. Before a VITA or TCE sponsor may collect a fee, the sponsor must advise
the taxpayer that the fee is not for preparation of the return and the VITA or TCE service is
offered without regard to either the electronic filing or the collection of a fee.
A VITA or TCE sponsor and the IRS may enter into an agreement that provides for the
retention of copies of tax returns, Forms 8453, and IRS e-file Signature Authorizations by the
IRS. This information must be retained by either the VITA or TCE sponsor or by the IRS. This
information must not be given to a third party, including a third party Transmitter. The IRS
is responsible for ensuring that Form 8453 is sent to the appropriate IRS office or submission
processing center. However, the IRS may delegate to the VITA or TCE sponsor the responsibility for mailing Form 8453 to the appropriate local office or submission processing center.
Employers Offering IRS e-file as an Employee Benefit
The following procedures apply to employers who choose to offer electronic filing as an
employee benefit to business owners and spouses, employees and spouses, and/or dependents
of business owners and employees. These rules do not apply if an employer contracts with an
ERO to originate the electronic submission of the tax return.
An employer may offer electronic filing as an employee benefit whether the employer chooses
to transmit tax returns or contracts with a third party to transmit the tax returns. If an
employer contracts with a third party to transmit tax returns, the employer may collect from
participating employees a fee that is directly related to defraying the actual cost of transmitting
the electronic portion of the tax return.
An employer and the IRS may enter into an agreement that provides for the retention of
copies of tax returns including Forms 8453 and IRS e-file Signature Authorizations. In the
absence of such an agreement, the employer must retain this information. This information
is not to be given to a third party, including a third party Transmitter.
33
Chapter
4
Transmission
Requirements
In fulfilling the requirements of a Provider participating in IRS e-file as a Transmitter
you must:
1. Transmit all electronic portions of returns to the appropriate IRS center within
three calendar days of receipt;
2. Retrieve the acknowledgment file within two work days of transmission;
3. Match the acknowledgment file to the original transmission file and send the
acknowledgment file containing all conditions on accepted returns, including debt
indicator, non-receipt of PIN, etc. to the ERO or Intermediate Service Provider
within two work days of retrieving the acknowledgment file;
4. Retain an acknowledgment file received from the IRS until the end of the calendar
year in which the electronic return was filed;
5. Immediately contact the IRS at its e-Help toll-free number 1-866-255-0654 for
further instructions if an acknowledgment of acceptance for processing has not
been received within two work days of transmission or if an acknowledgment for
a return that was not transmitted on the designated transmission is received;
6. Promptly correct any transmission error that causes an electronic transmission
to be rejected;
7. Contact the IRS at its e-Help toll-free number 1-866-255-0654 for assistance if
the electronic portion of the return has been rejected after three transmission
attempts;
8. Ensure the security of all transmitted data;
9. Ensure against the unauthorized use of its EFIN or ETIN. A Transmitter must not
transfer its EFIN or ETIN by sale, merger, loan, gift, or otherwise to another entity;
and
10. Use only software that does not have an IRS assigned production password built
into the software.
34
Additional Requirements for Participants in Online Filing
In addition to requirements of all Transmitters in the IRS e-file Program, a Transmitter that
participates in Online Filing has some additional responsibilities.
When participating in Online Filing, the Transmitter must:
1. Ensure that it uses an EFIN or ETIN obtained for Online Filing;
2. Ensure that Intermediate Service Provider’s EFIN is included in the electronic return data,
when applicable;
3. Transmit in separate batches returns filed via Online Filing and returns filed using an
ERO;
4. Assign a Declaration Control Number (DCN) to the electronic portion of each return
received from a taxpayer;
5. Include the assigned DCN in the transmission of the electronic return data to the IRS;
6. Notify the taxpayer of the status of a return by sending an electronic transmission to the
taxpayer or the Intermediate Service Provider, when applicable, within two work days of
retrieving the acknowledgment file from the IRS or by mailing a written notification to
the taxpayer within one work day of retrieving the acknowledgment file;
7. Ensure that it does not transmit or accept for transmission more than five electronic
returns originating from one software package or from one e-mail address;
8. Provide the Internet Protocol (IP) information. The information consists of the IP
Address, IP Date, IP Time and IP Time Zone;
9. Enter into agreements with companies to allow access to Online Filing only if companies
correctly capture the IP Address of the computer submitting the return and the date, time,
time zone of the computer receiving it;
10. Include the letter “O” in the “Transmission Type Code” field of the Trans Record “A”.
35
Chapter
4
Transmission
The Transmitter must notify the taxpayer of the following if the IRS accepts the
electronic portion of a taxpayer’s return:
■
The date the transmission was accepted;
■
The DCN;
■
Where to put the DCN on Form 8453-OL;
■
The requirement to properly complete and timely submit a Form 8453-OL with
accompanying paper documents within one business day;
■
The appropriate submission processing center’s address to which Form 8453-OL
with accompanying paper documents must be sent;
■
That a Form 8453-OL must be received by the IRS, when applicable, before an
Online filed return is complete.
The Transmitter must notify the taxpayer of the following if the IRS rejects the
electronic portion of a taxpayer’s return:
■
That the IRS rejected the electronic portion of the taxpayer’s return;
■
The date of the rejection;
■
What the reject code(s) means;
■
What steps the taxpayer needs to take to correct the errors that caused the rejection;
and
■
That if the taxpayer chooses not to have the electronic portion of the return
corrected and transmitted to the IRS, or, if the electronic portion of the return
cannot be accepted for processing by the IRS, the taxpayer must file a paper return.
In order to be filed timely, the paper return must be filed by the later of the due
date of the return or ten calendar days after the date the IRS gives notification that
the electronic portion of the return is rejected or that it cannot be accepted for
processing. The paper return should include an explanation of why the return is
being filed after the due date.
A Transmitter that receives returns from an Intermediate Service Provider for Online
Filing must adhere to the same requirements as a Transmitter that transmits ERO
returns received from Intermediate Service Providers.
36
Electronic Postmark
A Transmitter may provide an electronic postmark to taxpayers that file Individual Income
Tax Returns and Extensions of Time to File Individual Income Tax Returns, through an ERO
or through Online Filing. The Transmitter creates the electronic postmark bearing the date
and time (in the Transmitter’s time zone) that the return is received at the Transmitter’s host
computer. The taxpayer must adjust the electronic postmark to the time zone where the ERO
is located or where the taxpayer resides in the case of Online Filing to determine the postmark’s actual time. For example, if the Transmitter provides an electronic postmark with a
time in the Pacific Time Zone but the taxpayer resides in the Eastern Time Zone, the taxpayer
must add three hours to the postmark time to determine the actual postmark time (Eastern
Time Zone).
If the electronic postmark is on or before the prescribed deadline for filing but the return is
received by the IRS after the prescribed deadline for filing, the return will be treated as filed
on the electronic postmark’s date. In order for a return to be treated as filed on the electronic
postmark’s date, all requirements for signing the return and completing a paper declaration
must be met. If the electronic postmark is after the prescribed deadline for filing, the IRS
actual receipt date, not the date of the electronic postmark will be the filing date. If a return
is rejected, a corrected return must be filed in accordance with the rules for timely filing
corrected returns after rejection of an electronic return.
A Transmitter is authorized to provide an electronic postmark if the Transmitter:
a) Creates an electronic postmark bearing the date and time (in the Transmitter’s time zone)
the return was received by the Transmitter’s host system;
b) Provides the electronic postmark to the taxpayer or the ERO no later than when the
acknowledgment is made available to the taxpayer in a format that precludes alteration
and manipulation of the electronic postmark information;
c) Provides the same electronic postmark data to the IRS in the electronic record of the return;
d) Provides taxpayers with an explanation of the electronic postmark and when the IRS treats
the electronic postmark as the filing date;
e) Refrains from using terms that currently have specific meaning in the postal industry such
as “certified” or “registered” and similar terms, and from using “Internal Revenue Service”,
37
Chapter
4
Transmission
“IRS” or “Federal” as a definer of the electronic postmark when discussing the
electronic postmark, including in all advertising, product packaging, articles, press
releases, and other presentations;
f) Retains a record of each electronic postmark until the end of the calendar year and
provides the record to the IRS upon request;
g) Transmits all tax returns and extensions of time to file that received an electronic
postmark to the IRS within two days of receipt from the ERO or from the taxpayer
in the case of Online Filing; and
h) Retains the original electronic postmark of the rejected return for a corrected return
that is received by the Transmitter through the last date for retransmitting rejected
returns and creates a new postmark for all returns, including corrected returns
received after the last date for retransmitting returns. All corrected returns retaining
an electronic postmark of a date through the prescribed last day of filing must be
transmitted to the IRS within two days of the date the return was received by the
Transmitter or the twenty second day of the respective month of the prescribed due
date, whichever is earlier.
Transmitting for Federal/State e-file
If you participate in Federal/State e-file, your software should meet both IRS and
state specifications. However, before electronic return data can be transmitted (in
Federal/State e-file, both Federal and state electronic return data is transmitted to
the IRS) all requirements for transmitting electronic data in IRS e-file must be met.
Contact the appropriate state coordinator for additional requirements specific to
that state.
38
Chapter
5
Other Authorized
IRS e-file Provider Activities
In addition to Electronic Return Origination and Transmission previously discussed,
there are other activities performed by Authorized IRS e-file Providers, including intermediate service and software development.
Intermediate Service Providers
An Intermediate Service Provider receives tax information from an ERO (or from a
taxpayer who files electronically using a personal computer, modem, and commercial
tax preparation software), processes the tax return information, and either forwards the
information to a Transmitter or sends the information back to the ERO or taxpayer
(for Online Filing).
An Authorized IRS e-file Provider participating as an Intermediate Service Provider
must meet the following responsibilities to participate in IRS e-file.
The Intermediate Service Provider must:
1. Deliver all electronic returns to a Transmitter or the ERO who gave the electronic
returns to the Intermediate Service Provider within three calendar days of receipt;
2. Retrieve the acknowledgment file from the Transmitter within one calendar day of
receipt by the Transmitter and send the acknowledgment file to the ERO (whether
related or not) within one work day of retrieving it;
3. Retain each acknowledgment file received from a Transmitter until the end of the
calendar year in which the electronic return was filed;
4. Input the addresses on a Form W-2, W-2G, 1099-R, or Schedule C when they
differ from the taxpayer’s address on the electronic individual income tax return if
inputting the electronic data; and
5. Send any return and Form 8453 needing changes as described in Chapter 3 back to
the ERO for correction.
39
Chapter
5
Other
Authorized IRS
e-file Provider
Activities
Additional Requirements for Participants in Online Filing
When a return is filed using Online Filing, the Intermediate Service Provider processes
information for a taxpayer so that a Transmitter can send the electronic return(s) to
the IRS. In so doing, the Intermediate Service Provider must:
1. Ensure that it uses an EFIN obtained for Online Filing;
2. Ensure that its Online Filing EFIN is included in the electronic return data,
when applicable;
3. Assign a Declaration Control Number (DCN) to the electronic portion of each
return received from a taxpayer;
4. Send the transmission to the Transmitter within 24 hours of the receipt of the return
from the taxpayer;
5. Ensure that no more than five tax returns are filed electronically by one software
package or from one e-mail address;
6. Ensure that software used by the taxpayer does not have a IRS-assigned production
password built into the software; and
7. Immediately forward to the taxpayer information received from the Transmitter
as required for Online Filing. For example, a Transmitter receives information
from the IRS regarding the status of the electronic portion of a taxpayer’s return.
See “Additional Responsibilities for Participants in Online Filing.”
Software Developers
A Software Developer develops software for the purposes of formatting electronic
return information according to IRS e-file specifications and/or transmitting electronic
return information directly to the IRS. IRS e-file specifications may be found in
Publication 1346, Electronic Return File Specifications and Record Layouts for Individual
Income Tax Returns. Software Developers must pass PATS testing as prescribed in
Publication 1436, Test Package for Electronic Filers of Individual Income Tax Returns.
40
A Software Developer must:
1. Promptly correct any software error which causes the electronic portion of a return to be rejected
and then promptly distribute that correction;
2. Ensure that any software package that will be used to transmit electronic portions of returns
from multiple Authorized IRS e-file Providers has the capability of combining returns from these
Providers into one IRS transmission file. Sorting requirements of the Declaration Control Number
(DCN) must be taken into account;
3. Ensure that an IRS assigned production password is not incorporated into its software;
4. Provide a copy of the software and accompanying documentation (a demonstration package
is sufficient) to the IRS, if requested, upon successful completion of the communication testing;
5. Ensure that its software contains appropriate language and version indicators for Consent To
Disclose and Jurat statements;
6. Ensure software contains IRS e-file Signature Authorization; and
7. Ensure its software allows for input of different addresses on appropriate forms and schedules.
Additional Responsibilities for Participants in Online Filing
A Software Developer that participates in Online Filing must also:
1. Ensure that its software package cannot be used to transmit more than five electronic returns;
2. Ensure that its software, if available for use on an Internet web site, cannot be used to file more
than five electronic returns from one e-mail address;
3. Ensure that its software contains a Form 8453-OL format that can be printed and used by a
taxpayer to file with IRS;
4. Ensure that its software contains a payment voucher that can be printed and used by a taxpayer
to file with the IRS;
5. Provide a copy of the software and accompanying documentation (a demonstration package
is sufficient) to the IRS Headquarters Online Filing Analyst upon successful completion of testing
(See Chapter 6 for address); and
6. Ensure the Internet Protocol (IP) statement is present.
41
Chapter
6
IRS e-file
Rules and Requirements
All Authorized IRS e-file Providers must adhere to IRS e-file rules and requirements to
continue participation in IRS e-file. Requirements are included in Revenue Procedure
2000-31, throughout this publication, and in other publications and notices that govern IRS e-file (See Publication 3112, IRS e-file Application and Participation). Adherence
to all rules and requirements is expected of all Providers regardless of where published.
Some rules and requirements are specific to the activities performed by the Provider
and are included in appropriate chapters of this publication. The following list, while
not all-inclusive, applies to all Authorized IRS e-file Providers of Individual Income
Tax Returns, excepting Software Developers that do not engage in any other IRS e-file
activity other than software development.
A Provider must:
1. Maintain an acceptable cumulative error or reject rate;
2. Adhere to the requirements for ensuring that tax returns are properly signed
and when applicable, provide legible and complete paper declarations;
3. Properly use the standard/non-standard Form W-2 indicator;
4. Properly use the Refund Anticipation Loan (RAL) indicator;
5. Include the ERO’s EFIN as the return EFIN for returns the ERO submits to
an Intermediate Service Provider or Transmitter;
6. Include the Intermediate Service Provider’s EFIN in the designated
Intermediate Service Provider field in the electronic return record;
7. Submit an electronic return to the IRS with information that is identical to
the information provided to the taxpayer on the copy of the return and when
applicable, the paper declaration;
42
Additional Requirements for Participants in Online Filing
In addition to the above, participants in Online Filing must adhere to the following:
1. Ensure that no more than five electronic returns are filed from one software package
or one e-mail address;
2. Supply a taxpayer with an accurate DCN;
3. Provide effective instructions to a taxpayer concerning the entry of the DCN on
Form 8453-OL; and
4. Submit any changes to the following information to the IRS Headquarters Online
Filing Analyst, SE:W:CAS:SP:IEF:P, 5000 Ellin Road, Lanham, MD 20706, by the
31st day of December preceding the filing season:
■
The brand name of the software the Provider will be using, has developed, or will
use for transmission. Required information about the software includes its Software
Developer, Transmitter, retail cost, and any additional costs for transmitting the
electronic portion of the taxpayer’s return. Additionally, software changes involving its
use to file Federal/State returns, Internet availability (including the Internet address),
successful completion of Participants Acceptance Testing (PATS), and the Professional
Package name under which the software was tested must be reported;
■
The Provider’s point of contact for matters relating to Online Filing and the
telephone number for the point of contact;
■
The applicant’s customer service number; and
■
The procedures the applicant will use to ensure that no more than five returns are
transmitted from one software package or from one e-mail address.
43
Chapter
6
IRS e-file
Rules and
Requirements
Financial Products
RALs and Other Financial Products
A Refund Anticipation Loan (RAL) is money borrowed by a taxpayer from a lender
based on the taxpayer’s anticipated income tax refund. Financial institutions also offer
a variety of other financial products to taxpayers based on their refunds. The IRS is in
no way involved in or responsible for RALs or the other financial products. Authorized
IRS e-file Providers that assist taxpayers in applying for a RAL or other financial product have additional responsibilities and may be sanctioned by the IRS if they failed to
adhere to the below requirements.
The Provider must:
■
Ensure taxpayers understand that by agreeing to a RAL or other financial product
they will not receive their refund from the IRS as the IRS will send their refund to
the financial institution;
■
Advise taxpayers that RALs are interest bearing loans and not a quicker way of
receiving their refunds from the IRS;
■
Advise taxpayers that if a Direct Deposit is not received within the expected time
frame for whatever reason, the taxpayers may be liable to the lender for additional
interest and other fees, as applicable for the RAL or other financial product (see
explanation below);
■
Advise taxpayers of all fees and other known deductions to be paid from their
refund and the remaining amount the taxpayers will actually receive;
■
Secure the taxpayer’s written consent as specified in Section 301.7216 to disclose
tax information to the lending financial institution in connection with an application
for a RAL or other financial product;
■
Ensure that if it is also the return preparer that it is not a related taxpayer to the
financial institution or other lender that makes a RAL or other financial product
agreement within the meaning of §267 or §707A; and
■
44
Adhere to fee restrictions and advertising standards below.
There are no guarantees that refunds will be deposited within a specified time or in their
entirety. For example, a refund may be delayed due to processing problems or, some or all
of the refund may be offset. The Department of the Treasury is not liable for any loss suffered
by taxpayers, Providers, or financial institutions resulting from reduced refunds or Direct
Deposits not being honored, causing refunds to be issued by check.
Fee Restrictions
Authorized IRS e-file Providers may not base their fees on a percentage of the refund amount
or compute their fees using any figure from tax returns.
When assisting a taxpayer in applying for a RAL or other financial product, the Provider may
charge a flat fee for that assistance. The fee must be identical for all customers and must not
be related to the amount of the refund or the financial product. The Provider must not accept
a fee that is contingent upon the amount of the refund or a RAL or other financial product
from a financial institution for any service connected with a financial product.
The IRS has no responsibility for the payment of any fees associated with the preparation
of a return, the transmission of the electronic portion of a return, or a RAL or other
financial product.
Advertising Standards
In addition to the advertising standards in Publication 3112, IRS e-file Applications
and Participation, there are additional responsibilities for Providers of Individual Income
Tax Returns.
Providers must not use improper or misleading advertising in relation to IRS e-file, including
the time frames for refunds and RALs or other financial products. Any claims by Providers
concerning faster refunds by virtue of electronic filing must be consistent with the language
in official IRS publications. If the availability of a RAL or financial product is being advertised,
the Provider and financial institution must clearly refer to or describe the funds being
advanced as a loan or other financial product, not as a refund. The advertisement on a RAL
or other financial product must be easy to identify, and in readable print. That is, it must be
made clear in the advertising that the taxpayer is borrowing against the anticipated refund or
45
Chapter
6
IRS e-file
Rules and
Requirements
receiving another financial product, and is not obtaining the refund itself from the
financial institution.
A Provider must not advertise that individual income tax returns may be electronically
filed prior to the Provider’s receipt of Forms W-2, W-2G, and 1099-R as the Provider is
generally prohibited from electronically filing returns prior to receipt of Forms W-2,
W-2G, and 1099-R. Advertisements must not imply that Forms W-2, W-2G, and 1099
R are not needed or that pay stubs or other documentation of earnings can be used to
file individual income tax returns.
In using the Direct Deposit name and logo in advertisement, the Provider must use
the name “Direct Deposit” with initial capital letters or all capital letters, use the
logo/graphic for Direct Deposit whenever feasible, and may change the color or size
of the Direct Deposit logo/graphic when it is used in advertising pieces.
Disclosure of Tax Return Information
Under §301.7216, disclosure of tax return information among Authorized IRS e-file
Providers for the purpose of preparing a tax return is permissible. For example, an
ERO may pass on tax return information to an Intermediate Service Provider and/or a
Transmitter for the purpose of having an electronic return formatted and transmitted
to the IRS. However, if the tax return information is disclosed or used in any other
way without the consent of the taxpayer, an Intermediate Service Provider and/or a
Transmitter may be subject to the penalties described in §301-7216 and/or the civil
penalties in §6713 for unauthorized disclosure or use of tax return information.
46
Preparer Penalties
Preparer penalties may be asserted against an individual or firm meeting the definition of
an income tax preparer under §7701(a)(36) and §301.7701-15. Preparer penalties that may
be asserted under appropriate circumstances include, but are not limited to, those set forth
in §§6694, 6695, and 6713.
Under §301.7701-15(d), Authorized IRS e-file Providers are not income tax return preparers
for the purpose of assessing most preparer penalties as long as their services are limited to
“typing, reproduction, or other mechanical assistance in the preparation of a return or
claim for refund”. If an ERO, Intermediate Service Provider, Transmitter, or the product of a
Software Developer alters the return information in a nonsubstantive way, this alteration
will be considered to come under the “mechanical assistance” exception described in
§301.7701-15(d). A nonsubstantive change is a correction or change limited to a transposition error, misplaced entry, spelling error, or arithmetic correction.
If an ERO, Intermediate Service Provider, Transmitter, or the product of a Software Developer
alters the return in a way that does not come under the “mechanical assistance” exception,
the Authorized IRS e-file Provider may be held liable for income tax return preparer penalties.
See §301.7701-15; Rev. Rul. 85-189, 1985-2 C.B. 341 (which describes a situation where the
Software Developer was determined to be an income tax return preparer and subject to
certain preparer penalties).
A $500 penalty may be imposed, per §6695(f), on a return preparer who endorses or negotiates a refund check issued to any taxpayer other than the return preparer. The prohibition on
return preparers negotiating a refund check is limited to a refund check for returns they prepared. A preparer that is also a financial institution, but has not made a loan to the taxpayer
on the basis of the taxpayer’s anticipated refund, may cash a refund check and remit all of the
cash to the taxpayer or accept a refund check for deposit in full to a taxpayer’s account provided the bank does not initially endorse or negotiate the check; or endorse a refund check
for deposit in full to a taxpayer’s account pursuant to a written authorization of the taxpayer.
A preparer bank may also subsequently endorse or negotiate a refund check as part of the
check-clearing process through the financial system after initial endorsement. Any income tax
return preparer that violates this provision may be sanctioned.
In addition to the above specified provisions, the IRS reserves the right to assert all appropriate preparer and nonpreparer penalties against an Authorized IRS e-file Provider as warranted.
47
Paperwork
Reduction Act Notice
The collections of information contained in this publication have been reviewed and
approved by the Office of Management and Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. 3507) under control number 1545-1708.
An agency may not conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection of information displays a valid control
number. Books or records relating to a collection of information must be retained
as long as their contents may become material in the administration of any internal
revenue law. Generally, tax returns and tax return information are confidential, as
required by 26 U.S.C. § 6103.
The collections of information in this publication are in chapters 3, 4, and 5. This
information is required to implement IRS e-file and to enable taxpayers to file their
individual income tax returns electronically. The information will be used to ensure
that taxpayers receive accurate and essential information regarding the filing of their
electronic returns and to identify the persons involved in the filing of electronic
returns. The collections of information are required to retain the benefit of participating in IRS e-file. The likely respondents are business or other for-profit institutions.
The estimated total annual reporting and recordkeeping burden is 3,636,463 hours.
If you have comments concerning the accuracy of these time estimates or suggestions
for making publication simpler, we would be happy to hear from you. You can write to
the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA
95743-0001.
48
Glossary
Acceptance Letter Correspondence issued by the IRS to applicants confirming they
may participate in IRS e-file and annually to Authorized IRS e-file Providers confirming
they may continue to participate in IRS e-file. See also “Credentials.”
Acknowledgment (ACK) A report generated by the IRS to a Transmitter that
indicates receipt of all transmissions. An ACK Report identifies the returns in each
transmission that are accepted or rejected for specific reasons.
Acceptance or Assurance Testing (ATS) Required testing for Software Developers
that participate in IRS e-file to assess their software and transmission capability with
the IRS, prior to live processing. PATS, BATS and CATS are acceptance or assurance
testing specific to certain form types.
Administrative Review Process The process by which a denied applicant or
sanctioned Authorized IRS e-file Provider may appeal the IRS’ denial or sanction.
Adoption Taxpayer Identification Number (ATIN) A tax processing number
issued by the IRS as a temporary taxpayer identification number for a child in the
domestic adoption process who is not yet eligible for a Social Security Number
(SSN). An ATIN is not a permanent identification number and is only intended
for temporary use. To obtain an ATIN, complete IRS Form W-7A, Application for
Taxpayer Identification Number for Pending U.S. Adoptions.
Authorized IRS e-file Provider (Provider) A firm accepted to participant in
IRS e-file.
Automated Clearing House (ACH) A system that administers electronic funds
transfers (EFTs) among participating financial institutions. An example of such a
transfer is Direct Deposit of a tax refund from IRS into a taxpayer’s account at a
financial institution.
Batch A single transmission consisting of the electronic data from single or multiple
tax returns.
Communications Testing Required test for all Transmitters using accepted IRS e-file
software to assess their transmission capability with the IRS, prior to live processing.
49
Glossary
Credentials Documentation issued by the IRS which indicates qualification of an
Authorized IRS e-file Provider to participate in the IRS e-file Program. The documentation consists of identification numbers and acceptance letters.
Debt Indicator (DI) The Debt Indicator is a field on an ACK Report. It only indicates
whether a debt offset of a taxpayer’s refund will occur. It does not indicate how much
the offset will be. Offsets taken by IRS may be for current and prior year tax obligations. Offsets taken by the Financial Management IRS (FMS) are for past due student
loans, child support, Federal taxes, state taxes, or other governmental agency debts.
Declaration Control Number (DCN) A unique 14-digit number assigned by
the ERO (or Transmitter, in the case of Online Filing), to each electronically filed
tax return.
Denied Applicant An applicant that is not accepted to participate in IRS e-file.
An applicant that has been denied participation in IRS e-file has the right to an
administrative review.
Depositor Account Number (DAN) The financial institution account to which
a Direct Deposit refund is to be routed.
Digital Daily The IRS web site located at http://www.irs.gov
Direct Deposit An electronic transfer of a refund into a taxpayer’s financial
institution account.
Direct Filer see “Transmitter”.
Drain The IRS scheduled time for processing electronically filed return data.
Drop or Dropped An EFIN that is no longer valid due to inactivity or other
administrative action.
Due Diligence Due Diligence when used in context with the Earned Income Tax
Credit (EITC) refers to requirements that income tax return preparers must follow
when preparing returns or refund claims that involve EITC.
Earned Income Tax Credit (EITC) The Earned Income Tax Credit is a refundable
individual income tax credit for certain persons who work.
EITC Recertification A requirement for a taxpayer previously denied EITC to pro-
vide additional information on Form 8862, Information to Claim Earned Income Tax
Credit After Disallowance, when they file a similar EITC claim on a subsequent return.
50
Electronic Federal Tax Payment System (EFTPS) A free service from the U.S. Treasury
through which federal taxes may be paid. Taxes can be paid via the Internet, by phone or
through a service provider. After authorization, payments are electronically transferred from
the authorized bank account to the Treasury’s general account.
Electronic Filing Identification Number (EFIN) An identification number assigned by
the IRS to accepted applicants for participation in IRS e-file.
Electronic Funds Transfer (EFT) The process through which Direct Deposit refunds are
transmitted from the government to the taxpayer’s account at a financial institution.
Electronic Funds Withdrawal (EFW) A payment method which allows the taxpayer
to authorize the U.S. Treasury to electronically withdrawal funds from their checking or
savings account.
Electronic Postmark The Electronic Postmark is the date and time the electronic
return is first received on the Transmitter’s host computer in the Transmitter’s time zone.
The ERO, or taxpayer in the case of Online Filing, adjusts the time to their time zone to
determine timeliness.
Electronic Return Originator (ERO) An Authorized IRS e-file Provider that originates
the electronic submission of returns to the IRS.
Electronic Signature Method of signing a return electronically through use of a Personal
Identification Number (PIN). See also“Self-Select PIN Method” and “Practitioner PIN Method.”
Electronic Tax Administration (ETA) Electronic Tax Administration (ETA) is the office
within IRS with management oversight of the IRS’ electronic commerce initiatives. The
mission of ETA is to revolutionize how taxpayers transact and communicate with the IRS.
Electronic Tax Administration Advisory Committee (ETAAC) An advisory group
established by the IRS Restructuring and Reform Act of 1998 to provide an organized public
forum for discussion of ETA issues in support of the overriding goal that paperless filing
should be the preferred and most convenient method of filing tax and information returns.
Electronic Transmitter Identification Number (ETIN) An identification number assigned
by the IRS to a participant in IRS e-file that performs activity of transmission and/or software
development.
Electronically Transmitted Documents (ETD) A system created to process electronic
documents that are not attached to a tax return and are filed separately from the tax return.
51
Glossary
Error Reject Code (ERC) Codes included on an Acknowledgment (ACK) Report
for returns that are rejected by the IRS. ERC explanations are published annually prior
to the filing season in Publication 1345A, Filing Season Supplement for Authorized IRS
e-file Providers of Individual Income Tax Returns, and Publication 1346, Electronic
Return File Specifications and Record Layouts for Individual Income Tax Returns.
Federal/State e-file The Federal/State e-file option allows Federal and state income
tax returns to be filed electronically in a single transmission to the IRS.
Financial Institution For the purpose of Direct Deposit of tax refunds, a financial
institution is defined as a state or national bank, savings and loan association, mutual
savings bank, or credit union. Only certain financial institutions and certain kinds of
accounts are eligible to receive Direct Deposits of tax refunds.
Financial Management Service (FMS) The agency of the Department of the
Treasury through which payments to and from the government, such as Direct
Deposits of refunds, are processed.
Form Field Number or Form Sequence (SEQ) Number The identifier of specific
data on an electronic tax return record layout as defined in Publication 1346, Electronic
Return File Specifications and Record Layouts for Individual Income Tax Returns.
Fraudulent Return A “fraudulent return” is a return in which the individual is
attempting to file using someone’s name or SSN on the return or where the taxpayer
is presenting documents or information that have no basis in fact. Note: Fraudulent
returns should not be filed with the IRS.
Indirect Filer An Authorized IRS e-file Provider who submits returns to IRS via the
services of a Transmitter.
Individual Taxpayer Identification Number (ITIN) A tax processing number that
became available on July 1, 1996, for certain nonresident and resident aliens, their
spouses and dependents. The ITIN is only available from IRS for those individuals who
cannot obtain a Social Security Number (SSN). To obtain an ITIN, complete IRS Form
W-7, Application for IRS Individual Identification Number.
Intermediate Service Provider An Authorized IRS e-file Provider that receives elec-
tronic tax return information from an ERO or a taxpayer who files electronically using
a personal computer, commercial tax preparation software and a modem, processes the
electronic tax return information, and either forwards the information to a Transmitter
or sends the information back to the ERO or taxpayer.
52
Internet Protocol (IP) Information The IP address, date, time, and time zone of the
origination of a tax return filed through Online Filing via the Internet. IRS requires
Transmitters that provide Online Services via the Internet to capture the Internet Protocol
Information of Online returns. By capturing this information, the location of the return’s
originator is transmitted with the individual’s electronic return. See Publication 1346 for
additional information.
IRS e-file The brand name of the electronic filing method established by the IRS.
IRS e-file Marketing Tool Kit A specially designed kit containing professionally developed
material that EROs may customize for use in advertising campaigns and promotional efforts.
IRS Master File A centralized IRS database containing taxpayers’ personal return information.
Levels of Infractions (LOI) Categories of infractions of IRS e-file rules based on the serious-
ness of the infraction with specified sanctions associated with each level. Level One is the least
serious, Level Two is moderately serious, and Level Three is the most serious.
Memorandum of Agreement (MOA) & Memorandum of Understanding (MOU) The
implementing document containing the set of rules established by the IRS for participating in
IRS pilot programs.
Monitoring Activities the IRS performs in order to ensure that Authorized IRS e-file
Providers are in compliance with the IRS e-file requirements. Monitoring may include, but
is not limited to, reviewing IRS e-file submissions, investigating complaints, scrutinizing
advertising material, checking signature form submissions and/or recordkeeping, examining
records, observing office procedures and conducting annual suitability checks. These activities
are performed by IRS personnel at IRS offices and at the offices of Providers.
Name Control The first four significant letters of a taxpayer’s last name that are used in
connection with the taxpayer SSN to identify the taxpayer, spouse, and dependents.
Nonsubstantive Change A correction or change limited to a transposition error, misplaced
entry, spelling error, or arithmetic correction which does not require new signatures or
authorizations to be transmitted or retransmitted.
Originate or Origination Origination of an electronic tax return submission occurs when
an ERO either: (1) directly transmits electronic returns to the IRS, (2) sends electronic returns
to a Transmitter, or (3) provides tax return data to an Intermediate Service Provider.
53
Glossary
Participants Acceptance Testing (PATS) Required testing for all Software
Developers that participate in IRS e-file of individual income tax returns to assess
their software and transmission capability with the IRS, prior to live processing.
See also “Acceptance or Assurance Testing.”
PATS Communications Test Required for all Transmitters using accepted IRS e-file
software for individual income tax returns to assess their transmission capability with
the IRS, prior to live processing.
Pilot Programs An approach that the IRS uses to improve and simplify IRS e-file.
Pilot programs are usually conducted within a limited geographic area or within a
limited taxpayer or practitioner community. The IRS rules for participating in pilot
programs are embodied in an implementing document typically referred to as a
“Memorandum of Understanding” (MOU) or “Memorandum of Agreement” (MOA).
Pilot participants must agree to the provisions of the implementing document in
order to participate in the pilot program.
Potentially Abusive Return A “potentially abusive return” is a return (1) that is
not a fraudulent return; (2) that the taxpayer is required to file; (3) that may contain
inaccurate information that may lead to an understatement of a liability or an overstatement of a credit resulting in production of a refund to which the taxpayer may
not be entitled. Note: The decision not to provide a RAL or other bank product does
not necessarily make it an abusive return.
Practitioner PIN Method An electronic signature option for taxpayers who use
an ERO to e-file. This method requires the taxpayer to create a five-digit Personal
Identification Number (PIN) to use as the signature on the e-file return.
Preparer’s Tax Identification Number (PTIN) An identification number issued by
the IRS which paid tax return preparers may use in lieu of disclosing their Social
Security Number (SSN) on returns that they prepared. A PTIN meets the requirements
under section 6109(a)(4) of furnishing a paid tax return preparer’s identifying number
on returns that he or she prepares. To obtain a PTIN, go to the IRS web site at irs.gov.
Refund Anticipation Loan (RAL) A Refund Anticipation Loan is money borrowed
by a taxpayer that is based on a taxpayer’s anticipated income tax refund. The IRS has
no involvement in RALs. A RAL is a contract between the taxpayer and the lender. A
RAL may be marketed under various commercial or financial product names.
54
Refund Cycle The anticipated date that a refund would be issued by the IRS either by
Direct Deposit or by mail to a taxpayer for a return included within a specific “drain”.
However, neither the IRS nor FMS guarantees the specific date that a refund will be mailed
or deposited into a taxpayer’s financial institution account.
Request for Agreement (RFA) A solicitation, normally a written document, used in
establishing non-monetary memoranda of agreement. RFAs are not “acquisitions” as defined
by the Federal Acquisition Regulations (FAR).
Request for Procurement (RFP) A solicitation, normally a written document, used in
negotiated acquisitions estimated over $100,000 (as opposed to sealed bids) to communicate
government requirements to prospective contractors and to solicit proposals to perform
contracts.
Responsible Official An individual with authority over the IRS e-file operation of the
office(s) of an Authorized IRS e-file Provider, who is the first point of contact with the IRS,
and has authority to sign revised IRS e-file applications. A Responsible Official is responsible
for ensuring that the Authorized IRS e-file Provider adheres to the provisions of the Revenue
Procedure and the publications and notices governing IRS e-file.
Revenue Protection A series of compliance programs designed to ensure that the revenue
the government collects and/or disburses in the form of refunds is accurate and timely, and
that disbursement of revenue is issued only to entitled taxpayers.
Routing Transit Number (RTN) A number assigned by the Federal Reserve to each
financial institution.
Sanction An action taken by the IRS to reprimand, suspend or expel from participation
in IRS e-file, an Authorized IRS e-file Provider based on the level of infraction. See also
“Level of Infraction.”
Self-Select PIN Method An electronic signature option for taxpayers who e-file using
either a personal computer or an ERO. This method requires the taxpayer to create a five-digit
Personal Identification Number (PIN) to use as the signature on the e-file return and to
submit authentication information to the IRS with the e-file return.
Software Developer An Authorized IRS e-file Provider that develops software for the
purposes of (a) formatting the electronic portions of returns according to Publication 1346;
and/or (b) transmitting the electronic portion of returns directly to the IRS. A Software
Developer may also sell its software.
55
Glossary
Stockpiling Stockpiling refers to waiting more than three calendar days to submit
returns to the IRS after the Provider has all necessary information for origination of
the electronic return. Stockpiling may also occur when returns are collected for e-file
prior to official acceptance for participation in IRS e-file. Collecting tax returns for IRS
e-file prior to the startup of IRS e-file is not considered stockpiling. However, Providers
must advise taxpayers that the returns will not be transmitted to the IRS prior to the
startup date.
Suitability A check conducted on all firms and the Principals and Responsible
Officials of firms when an application is initially processed, and on a regular basis
thereafter. The suitability check includes a background check conducted by the IRS
to ensure the firm and individuals are eligible for participation in IRS e-file.
Suspension A sanction revoking an Authorized IRS e-file Provider’s privilege to
participate in IRS e-file.
Transmitter An Authorized IRS e-file Provider that transmits the electronic portion
of a return directly to the IRS. An entity that provides a “bump-up” service is also a
Transmitter. A bump-up service provider increases the transmission rate or line speed
of formatted or reformatted information that is being sent to the IRS via a public
switched telephone network.
Treasury Offset Program (TOP) Public Law established the Tax Refund Offset
Program which permits overpayments to be offset against delinquent child support
obligations, as well as debts owed to participating Federal and state agencies. FMS
assumes responsibility and oversight for the Treasury Offset Program.
Warning Written notice given by the IRS to an Authorized IRS e-file Provider
requesting specific corrective action be taken to avoid future sanctioning.
Written Reprimand A sanction for a level one infraction of the IRS e-file rules.
It reprimands a Provider for an infraction but does restrict or revoke participation in
IRS e-file.
56
Department of the Treasury
Internal Revenue Service
w w w . i r s . g o v
Publication 1345 (Rev.11-04)
Catalog Number 64382J
| File Type | application/pdf |
| File Title | Publication 1345 (Rev. 11-2004) |
| Subject | Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns |
| Author | OS:CIO:I:ET:S:SP |
| File Modified | 2004-11-16 |
| File Created | 2004-11-12 |