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Providers of Individual
Income Tax Returns
Table of Contents,,
Chapter 1 — Stay Informed,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,
What’s New in Publication 1345?,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,
Where to Get Additional Information,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,
Chapter 2 — Must Read,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,
Publications for Individual Income Tax Returns,. . . . . . . . . . . . . . . . . . . . . . . . . . 4,
Safeguarding IRS e-file,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,
New IRS e-file Security and Privacy Standards,. . . . . . . . . . . . . . . . . . . . . . . . . 5,
“Returns Filed” Using IRS e-file,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,
Returns Not Eligible for IRS e-file,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,
Submitting a Timely Filed Electronic Tax Return,. . . . . . . . . . . . . . . . . . . . . . . . 8,
Federal/State e-file,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,
Chapter 3 — Electronic Return Origination,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,
Obtaining, Handling and Processing Return
Information from Taxpayers,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,
Safegaurding IRS e-file from Fraud and Abuse,. . . . . . . . . . . . . . . . . . . . . . . . 11,
Verifying Taxpayer Identification Numbers (TINs,). . . . . . . . . . . . . . . . . . . . . . 11,
Be Aware of Non-Standard Information Documents,. . . . . . . . . . . . . . . . . . 12,
Be Careful with Addresses,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,
Avoiding Refund Delays,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,
Refund Returns,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,
Direct Deposit of Refunds,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,
Balance Due Returns,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,
Electronic Funds Withdrawal,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,
Credit or Debit Card Payments,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,
Electronic Federal Tax Payment System (EFTPS),.. . . . . . . . . . . . . . . . . . . . 18,
Pay by Check,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,
Installment Agreement Requests,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,
Signing an Electronic Tax Return,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,
Electronic Signature Methods,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,
IRS e-file Signature Authorization,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,
Electronic Signatures for EROs,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,
Electronic Signature Guidance for Forms 8878 and 8879,.. . . . . . . . . . . . 22,
Submitting the Electronic Return to the IRS,.. . . . . . . . . . . . . . . . . . . . . . . . . . . 24,
Internet Protocol Information,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,
Submission of Paper Documents to the IRS,. . . . . . . . . . . . . . . . . . . . . . . . . . 26,
ERO Duties after Submitting the Return to the IRS,. . . . . . . . . . . . . . . . . . . . . 27,
Record Keeping and Documentation Requirements,. . . . . . . . . . . . . . . . . . . 27,
ii
Table of Contents (continued),
Providing Information to the Taxpayer,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,
Acknowledgments of Transmitted Return Data,. . . . . . . . . . . . . . . . . . . . . . . 28,
Resubmission of Rejected Tax Returns,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,
Advising Taxpayers about Refund Inquiries,. . . . . . . . . . . . . . . . . . . . . . . . . . . 30,
Refund Delays,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,
Refund Offsets,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,
Other EROs,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,
IRS Sponsored Programs,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,
Employers Offering IRS e-file as an Employee Benefit,. . . . . . . . . . . . . . . . 33,
Chapter 4 — Transmission,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,
Requirements,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,
Additional Requirements for Transmitters Participating
in Online Filing,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,
Electronic Postmark,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,
Transmitting for Federal/State e-file,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,
Chapter 5 — Other Authorized IRS e-file Provider Activities,. . . . . . . . . . 39,
Intermediate Service Providers,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,
Additional Requirements for Intermediate Service Providers
Participating in Online Filing,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,
Software Developers,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,
Additional Requirements for Software Developers
Participating in Online Filing,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,
Additional Requirements for Software Developers
Enabling Electronic Signatures for Forms 8878 and 8879,. . . . . . . . . . . . . 41,
Chapter 6 — IRS e-file Rules and Requirements,. . . . . . . . . . . . . . . . . . . . . . . 43,
Additional Requirements for Participants in Online Filing,. . . . . . . . . . . . . 43,
Tax Refund-Related Products,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,
Fee Restrictions,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,
Advertising Standards,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,
Disclosure of Tax Return Information,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,
Penalty Information for Authorized IRS e-file Providers,. . . . . . . . . . . . . . . 46,
Paperwork Reduction Act Notice,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,
Glossary,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,
iii
Chapter 1,
Stay Informed
,
What’s New in Publication 1345?
This edition of Publication 1345, Handbook for Authorized IRS e-file
Providers of Individual Income Tax Returns replaces the previous edition
revised March 2009. This publication continues to address only the rules
and requirements for participation in IRS e-file by Authorized IRS e-file
Providers (Providers) filing individual income tax returns and related forms
and schedules. All language directed to the Legacy system has been
changed to coincide with Modernized e-File (MeF) language.
Where to Get Additional Information,
The IRS offers a number of ways to find out what Authorized IRS e-file
Providers (Providers) 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 “Tax Pros and Partners”,
How does the IRS keep Providers informed
of operational issues?
The IRS posts all important operations information at IRS.gov. The IRS also
notifies Providers of important information via “QuickAlerts” e-file Messaging
System and various other subscription services.
n QuickAlerts
— Provides first-hand knowledge of processing delays the
moment they happen by e-mail.
n IRS
Newswire — Provides news releases and other documents via e-mail
as the IRS National Media Relations Office in Washington, DC issues them.
n IRS
Tax Tips — Provides tax information via e mail from the IRS daily during
the tax filing season and periodically the rest of the year.
n Tax
Stats Dispatch Mailing List – Provides announcements via e-mail,
which cover the most recent tax statistics.
1
This edition of
Publication 1345,
Handbook for Authorized
IRS e-file Providers of
Individual Income Tax
Returns replaces the
previous edition
revised March 2009.
n e-News
for Small Businesses — Provides information about IRS small
business and self employed outreach products and programs via e-mail.
n IRS
GuideWire – Provides advance copies of tax guidance such as
Revenue Rulings, Revenue Procedures, Announcements and Notices by
e-mail.
n e-News
for Tax Professionals — Provides the latest national news for the
tax professional community, as well as links to resources on IRS.gov and
local news and events by state.
Taxpayers can find
information about
Subscribe to these at Subscription Services.
Where can I find the current filing season information I need?
The IRS updates Modernized e-File (MeF) program information prior to each
filing season.
electronic payment
options at the
Electronic Payment
Options Home
Page.
If I get correspondence from the IRS, whom 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?
Providers may find telephone numbers and addresses at Help & Resources.
What information should I give taxpayers so they can inquire
about the status of their individual income tax refunds?
Taxpayers should be advised to check the status of their individual income
tax refunds using the Where’s My Refund or they may call (800) 829-1954.
Where can I get information about electronic
payment options?
Taxpayers can find information about electronic payment options at the
Electronic Payment Options Home Page.
How do I report suspected tax fraud activity?
If you suspect or know of an individual or company that is not
complying with the tax laws, see “How Do You Report
Suspected Tax Fraud Activity?”
2
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 problems exist, Providers should contact the vendor
who sold them the software or the technical support operation that comes
with the software package.
Where can I get information about the
IRS Nationwide Tax Forums?
This information can be found at IRS Nationwide Tax Forum Information.
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 available at
Federal/State e-file for Taxpayers.
Often, the Provider offering comprehensive one-stop tax service is the
If the Provider is
not participating in
Federal/State e-file, it
is missing a business
opportunity to offer its
most successful. If the Provider is not participating in Federal/State e-file, it is
clients and customers
missing a business opportunity to offer its clients and customers the benefits
the benefits and con-
and convenience of filing both federal and state tax returns electronically.
venience of filing both
See the Federal/State e-file section in Chapter 2.
federal and state tax
returns electronically.
3
Chapter 2
Must Read
,
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
Providers must
IRS e-file of individual income tax returns and related forms and schedules.
be diligent in
Violating a provision of this publication may subject the Authorized IRS e-file
Provider (Provider) to sanctions. Providers should familiarize themselves with
Revenue Procedure 2007-40, 2007-26 I.R.B. 1488 (or the latest update) and
Publication 3112, Applying and Participating in IRS e-file, to ensure compliance
with requirements for participation in IRS e-file. The IRS revises Publication
1345 periodically. Providers can download the latest published version of
Publication 1345. The most current information is available at Authorized IRS
e-file Providers e filing Individual Income Tax Returns on IRS.gov.
Publication 4164, Modernized e-File (MeF) Guide for Software Developers
and Transmitters, outlines the communication procedures, transmission
formats, business rules and validation procedures for returns e-filed through
the Modernized e-File (MeF) system.
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 (Providers). 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 must report fraud and abuse
to the IRS as explained in How Do You Report Suspected Tax Fraud Activity?
on IRS.gov. Providers must also cooperate with the IRS’ investigations by
making available to the IRS upon request, information and documents related
to returns with potential fraud or abuse.
Providers appoint an individual as a Responsible Official who is responsible
for ensuring the firm meets IRS e-file rules and requirements. Providers with
4
recognizing and
preventing fraud
and abuse in
IRS e-file.
,
problems involving fraud and abuse may be suspended or expelled from
participation in IRS e-file, be assessed civil and preparer penalties or be
subject to legal action.
IRS e-file Security and Privacy Standards,
The IRS has mandated six (6) security, privacy and business standards to
better serve taxpayers and protect their information collected, processed
and stored by Online Providers of individual income tax returns. Compliance
with these standards became mandatory January 1, 2010.
The standards are based on industry best practices and are intended
to supplement the Gram-Leach-Bliley Act and the implementing rules and
regulations promulgated by the Federal Trade Commission.
1. Extended Validation SSL Certificate,
This standard applies to Authorized IRS e-file Providers participating in
Online Filing of individual income tax returns that collect taxpayer information
The IRS has mandated
via the Internet. These Providers shall possess a valid and current Extended
six security, privacy and
Validation Secure Socket Layer (SSL) certificate using SSL 3.0 / TLS 1.0 or
business standards to
later and minimum 1024-bit RSA /128-bit AES.
better serve taxpayers
and protect their
2. External Vulnerability Scan,
This standard applies to Providers participating in Online Filing of individual
income tax returns that collect, transmit, process or store taxpayer information. These Providers shall contract with an independent third-party vendor
information collected,
processed and stored
by Online Providers of
to run weekly external network vulnerability scans of all their “system compo-
individual income tax
nents” in accordance with the applicable requirements of the Payment Card
returns.
Industry Data Security Standards (PCIDSS). A scanning vendor certified by
the Payment Card Industry Security Standards Council and listed on their
current list of Approved Scanning Vendors (ASV) shall perform all scans. In
addition, Providers whose systems are hosted shall ensure that their host
complies with all applicable requirements of the PCIDSS.
For the purposes of this standard, “system components” is defined as any
network component, server or application that is included in or connected to
the taxpayer data environment. The taxpayer data environment is that part of
the network that possesses taxpayer data or sensitive authentication data.
If scan reports reveal vulnerabilities, action shall be taken to address the
vulnerabilities in line with the scan report’s recommendations. Retain weekly
scan reports for at least one year. The ASV and the host (if present) shall be
located in the United States.
5
3. Information Privacy and Safeguard Policies,
This standard applies to Providers participating in Online Filing of individual
income tax returns that own or operate a Web site through which taxpayer
information is collected, transmitted, processed or stored. These Providers
shall have written information privacy and safeguard policy consistent with
the applicable government and industry guidelines and including the following
Providers shall
statement: “We maintain physical, electronic and procedural safeguards that
report security
comply with applicable law and federal standards.”
incidents to the IRS
In addition, a privacy seal vendor acceptable to the IRS shall certify
Providers’ compliance with these policies.
as soon as possible
but no later than the
4. Web site Challenge-Response Test,
next business day
This standard applies to Providers participating in Online Filing of individual
after confirmation
income tax returns that own or operate a Web site through which taxpayer
of the incident.
information is collected, transmitted, processed or stored. These Providers
shall implement an effective challenge-response protocol (e.g., CAPTCHA) to
protect their Web site against malicious bots. Taxpayer information shall not
be collected, transmitted, processed or stored unless the user successfully
completes this challenge-response test.
5. Public Domain Name Registration,
This standard applies to Providers participating in Online Filing of individual
income tax returns that own or operate a Web site through which taxpayer
information is collected, transmitted, processed or stored. These Providers
shall have their Web site’s domain name registered with a domain name
registrar that is located in the United States and accredited by the Internet
Corporation for Assigned Names and Numbers (ICANN). The domain name
shall be locked and not be private.
6. Reporting of Security Incidents,
This standard applies to Providers participating in Online Filing of individual
income tax returns that collect, transmit, process or store taxpayer information. These Providers shall report security incidents to the IRS as soon as
possible but no later than the next business day after confirmation of the
incident. For the purposes of this standard, an event that can result in an
unauthorized disclosure, misuse, modification or destruction of taxpayer information shall be considered a reportable security incident. See instructions
for submitting incident reports.
In addition, if the Provider’s Web site is the proximate cause of the incident,
the Provider shall cease collecting taxpayer information via their Web site
immediately upon detection of the incident and until the underlying causes of
the incident are successfully resolved.
6
“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 consists of Form 8453, U.S. Individual Income
Tax Transmittal for an IRS e-file Return and other documents that cannot be
electronically transmitted attached to the form and mailed to the IRS (See
Chapter 3).
Filing individual income tax returns using IRS e-file is limited to tax returns
with prescribed due dates in the current and two previous tax years. A tax-
A taxpayer can
electronically file
an individual income
tax return year round
payer can electronically file an individual income tax return year round except
except for a short
for a short cutover period at the end of the calendar year.
cutover period
If Authorized IRS e-file Providers (Providers) submit state individual income
tax returns as part of Federal/State e-file, state returns become a 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. Providers 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:
n
Tax returns with fiscal year tax periods;
n
Amended tax returns;
n
Returns containing forms or schedules that cannot be processed
by IRS e-file;
n
Tax returns with Taxpayer Identification Numbers (TIN) within the range of
900-00-0000 through 999-99-9999. Exception: Adoption 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 88,
90 through 92 and 94 through 99 in the fourth and fifth digits. See Verifying
Taxpayer Identification Numbers in Chapter 3 for more information; and
n
The IRS cannot electronically process tax returns with rare or unusual
processing conditions or that exceed the specifications for returns allowable
in IRS e-file. These conditions change from year to year. The software should
alert Providers to these conditions when they occur. If Providers transmit
electronic return data with one of these conditions to the IRS, it rejects and
the taxpayer may have to file the tax return on paper. The software package
documentation or the software’s support program should provide information
that is more specific.
7
at the end of the
calendar year.
Submitting a Timely Filed Electronic Tax Return,
All prescribed due dates for filing of returns apply to electronically filed
returns. All 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 it transmits the electronic portion of the
return on or before the due date (including extensions). An electronically filed
return is not considered filed until the IRS acknowledges acceptance of the
electronic portion of the tax return for processing. The IRS accepts individual
income tax returns electronically only if the taxpayer signs the return using a
Personal Identification Number (PIN). If Providers transmit the electronic portion of a return on or shortly before the due date and the IRS ultimately rejects
it, but the Provider and the taxpayer comply with the requirements for timely
resubmission of a correct return, the IRS considers the return 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
An electronically
filed return is not
considered filed
until the IRS
returns if the Transmitters adhere to the requirements in Chapter 4. The re-
acknowledges
ceipt of an electronic postmark provides taxpayers with confidence that they
acceptance of the
have filed their return timely. The date of the electronic postmark is consid-
electronic portion
ered the date of filing when the date of electronic postmark is on or before the
of the tax return
prescribed due date and the return is received by the IRS after the prescribed
for processing.
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, which allows Authorized IRS e-file Providers (Providers) to file
federal and state returns electronically to IRS. The state return can be sent
linked to the federal return (by including the Submission ID of the federal
return in the state submission), or it can be sent unlinked (standalone). On
linked returns, the federal return must be accepted before the linked state
return can be filed. In addition to accepting federal and state individual
income tax returns electronically in a single transmission, State Only returns
are also accepted if the return:
n
was previously rejected by the state;
n is
originated separately from the federal return;
8
n
is a part year residency return;
n
is a non-resident state return; or
n
is a married filing separate state return, but the federal return
was filed jointly.
The IRS provides state acknowledgement services. Participating states can
send their acknowledgements to the IRS for transmitters to pick up when
they pick up their federal acknowledgement.
Adding Federal/State e-file to a Provider’s business is very similar to the
process it went through to become a Provider. Refer to Publication 3112,
Applying and Participating in IRS e-file for further details. In addition, the
Provider should contact the state coordinators for the state programs in
which it participates for further explanation of state rules and requirements.
Participating states
can send their
acknowledgements
to the IRS for
transmitters to pick
up when they pick
up their federal
acknowledgement.
9
Electronic Return
Origination
Chapter 3
,
,
Obtaining, Handling and Processing
Return Information from Taxpayers,
An Electronic Return Originator (ERO) originates the electronic submission
An ERO originates the
of returns it either prepares or collects from taxpayers who want to e-file their
electronic submission
returns. An ERO originates the electronic submission of a return after the
of a return after the
taxpayer authorizes the filing of the return via IRS e-file. The ERO must have
taxpayer authorizes
either prepared the return or collected it from a taxpayer. An ERO originates
the filing of the return
the electronic submission by:
via IRS e-file.
n
Electronically sending the return to a Transmitter that transmits the return
to the IRS;
n
Directly transmitting the return to the IRS; or,
n
Providing a return to an Intermediate Service Provider for processing prior
to transmission to the IRS.
The ERO must always identify the paid preparer (if any) in the appropriate
field of the electronic record of returns it originates. The ERO must enter the
paid preparer’s identifying information (name, address, Employer Identification Number (EIN), when applicable and Preparer’s Tax Identification Number
(PTIN)). EROs may either transmit returns directly to the IRS or arrange with
another Authorized IRS e-file Provider (Provider) to transmit the electronic
return to the IRS.
A Provider, including an ERO, may disclose tax return information to
other Providers in connection with e-filing a tax return under Treas. Reg.
§301.7216-2(d)(1). 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 non-substantive change is a
correction limited to a transposition error, misplaced entry, spelling error
or arithmetic correction. The IRS considers all other changes substantive,
10
and the ERO becomes a tax return preparer. As such, the ERO may be
required to sign the tax return as the tax return preparer.
Safeguarding IRS e-file From Fraud and Abuse,
While all 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 must be diligent in recognizing fraud and abuse, reporting it to the IRS and preventing it when possible.
Providers must cooperate with the IRS’ investigations by making available
to the IRS upon request, information and documents related to returns with
An ERO must be
diligent in recogniz-
potential fraud or abuse. Additional information regarding Reporting Fraud
ing fraud and abuse,
and Abuse in IRS e-file is available on IRS.gov.
reporting it to the
Indicators of abusive or fraudulent returns may be unsatisfactory responses
to filing status questions, multiple returns with the same address, and missing
or incomplete Schedules A and C income and expense documentation. A
“fraudulent return” is a return in which the individual is attempting to file using
someone else’s name or SSN on the return or the taxpayer is presenting documents or information that have no basis in fact. A potentially abusive return
is a return that the taxpayer is required to file but contains inaccurate information that may lead to an understatement of a liability or the overstatement of a
credit resulting in a refund to which the taxpayer may not be entitled.
An ERO that is also the paid preparer 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. Paid preparers must complete all required worksheets
and meet all record keeping requirements.
Verifying Taxpayer Identification Numbers (TINs),
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, Adoption Taxpayer Identification
Numbers (ATINs) and Individual Taxpayer Identification Numbers (ITINs). To
prevent filing returns with stolen identities, an ERO should 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. In addition, seeing Social Security cards, ITIN letters and other documents avoids including
incorrect TINs for taxpayers, spouses and dependents on returns. Providers
should take care to ensure that they transcribe all TINs correctly.
The TIN entered in the Form W-2, Wage and Tax Statement in the electronic
11
IRS and preventing
it when possible.
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. The IRS requires taxpayers
filing tax returns filed using an Individual Taxpayer Identification Number
(ITIN) to include the TIN, usually a Social Security Number (SSN), shown on
Form W-2 from the employer in the electronic record of the Form W-2. This
may create an identification number (ITIN/SSN) mismatch, as taxpayers
must use their correct ITIN as the identifying number in the individual income
tax return. The IRS’ e-file system can accept returns with this identification
number mismatch. EROs should enter the TIN/SSN exactly as shown on the
Form W-2 provided to them by taxpayers. Software must require the manual
key entry of the TIN as it appears on Form W-2 reporting wages for taxpayers
with ITINs. EROs should ascertain that the software they use does not auto-
Having the wrong
populate the ITIN in the Form-W-2 and if necessary, replace the ITIN with the
Name Control
SSN on the Form W-2 the taxpayer provided.
associated with
Incorrect TINs, using the same TIN on more than one return or associating
a taxpayer’s TIN
the wrong name with a TIN are some of the most common causes of rejected
contributes to a
returns (see Acknowledgments of Transmitted Return Data in this chapter).
Additionally, Name Control and TINs identify taxpayers, spouses and dependents. 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.
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 in this chapter). Be on the lookout for suspicious or altered Forms
W-2, W-2G, 1099-R and forged or fabricated documents. EROs must 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. Providers must
never alter the information after the taxpayer has given the forms to them.
Providers should report questionable Forms W-2 if they observe or become
12
large portion of TIN
related rejects.
aware of them. See Reporting Fraud and Abuse Within the IRS e-file Program
at on IRS.gov.
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. Providers must
Providers must input
input addresses that differ from the taxpayer’s current address even if the
addresses that differ
addresses are old or if the taxpayer has moved. EROs should inform taxpay-
from the taxpayer’s
ers that when the return is processed, the IRS uses the address on the first
current address even if
page of the return to update the taxpayer’s address of record. The IRS uses
the addresses are old
a taxpayer’s address of record for various notices that it is required to send
or if the taxpayer has
to a taxpayer’s “last known address” under the Internal Revenue Code and
moved.
for refunds of overpayments of tax (unless otherwise specifically directed by
taxpayers, such as by Direct Deposit).
Providers must never put their address in fields reserved for taxpayers’
addresses in the electronic return record or on Form 8453, U.S. Individual
Income Tax Transmittal for an IRS e-file Return. The only exceptions are if
the Provider is the taxpayer or the power of attorney for the taxpayer for the
tax return.
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:
n
Insist on identification and documentation of social security and other
identification numbers for all taxpayers and dependents;
n
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;
n
Don’t submit returns claiming dubious items or with altered or suspicious
documents;
n
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
13
n
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, Authorized IRS e-file Providers
(Providers) should inform them 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.
Providers must not direct the payment (or accept payment) of any monies
issued to a taxpayer client by the government in respect of a Federal tax
liability to the Provider or any firm or entity with which the Provider is associated. The IRS may sanction Providers and individuals who direct or accept
such payment.
Circular 230 sets forth that endorsing or otherwise negotiating any check
Providers must
accept any Direct
(including directing or accepting payment by any means, electronic or other-
Deposit election to
wise, into an account owned or controlled by the Provider or any firm or other
qualified accounts
entity with which the practitioner is associated) is disreputable conduct.
in the taxpayer’s
name at any eligible
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
qualified accounts in the taxpayer’s name at any eligible financial institution
designated by the taxpayer. Qualified accounts include savings, checking,
share draft or consumer asset accounts (for example, IRA or money market
accounts). Taxpayers should not request a deposit of their refund to an account that is not in their own name (such as their tax preparer’s own account).
The taxpayer may not designate refunds for Direct Deposit to credit card accounts. Qualified accounts are accounts 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.
By completing Form 8888, Direct Deposit of Refund to More Than One
Account, the taxpayer may split refunds between up to three qualified accounts. A qualified account can be a checking, savings, or other account
such as an individual retirement arrangement (IRA), health savings account
(HSA), Archer MSA, Coverdell education savings account (ESA), and
TreasuryDirect online account. The taxpayer may also buy up to $5,000 in
U. S. Series I Bonds. For example, a taxpayer expecting a refund of $400 may
14
financial institution
designated by the
taxpayer.
choose to deposit $150 into a checking account, $150 into a savings account,
and $100 into an IRA account. Taxpayers may choose the refund splitting
option regardless of which Form 1040 series tax form they file.
Providers should caution taxpayers that some financial institutions do
not permit the deposit of joint individual income tax refunds into individual
accounts or into check or share draft accounts that are “payable through”
another institution. Taxpayers should verify their financial institution’s Direct
Taxpayers who choose
Deposit policy before they elect the Direct Deposit option. The IRS is not
Direct Deposit must
responsible if the financial institution refuses Direct Deposits for this reason.
provide Providers with
Taxpayers who choose Direct Deposit must provide Providers with account
numbers and routing transit numbers for qualified accounts. The form’s
instructions and software show how to find and identify these numbers. The
taxpayer can best obtain this information 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 products offered by financial institutions.
In those cases, Providers may supply the identifying account data.
Providers with repeat customers or clients should check to see if taxpayers
have new accounts. Some software stores prior year’s information and
reuses it unless it is changed. If account information is not current, taxpayers
do not receive Direct Deposit of their refunds.
Providers must advise taxpayers that they cannot rescind a Direct Deposit
election and they cannot make changes to routing transit numbers of financial
institutions or to their account numbers after the IRS has accepted the return.
Providers must not alter the Direct Deposit information in the electronic
record after taxpayers have signed the tax return.
Providers must never charge a separate fee for Direct Deposit,
Refunds that are not direct deposited because of institutional refusal, erroneous account or routing transit numbers, closed accounts, bank mergers or
any other reason are issued as paper checks, resulting in refund delays of up
to ten weeks. While the IRS ordinarily processes a request for Direct Deposit,
it reserves the right to issue a paper check and does not guarantee a specific
date for deposit of the refund into the taxpayer’s account.
Treasury’s Financial Management Service (FMS) issues federal income tax
refunds. Neither the IRS nor FMS is responsible for the misapplication of a
Direct Deposit that results from error, negligence or malfeasance on the part
of the taxpayer, the Provider, financial institution or any of their agents.
15
account numbers and
routing transit numbers
for qualified accounts.
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. Authorized IRS e-file Providers (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
Taxpayers have
withdrawal (EFW). Taxpayers who choose this option must provide account
several choices
numbers and routing transit numbers for qualified savings, checking or share
when paying any
draft accounts to the Provider. The IRS tax return instructions describe how
taxes owed on
to find and identify these numbers. Providers should encourage their clients
their returns as
to confirm their account numbers and routing transit numbers with their
well as estimated
financial institution. If a financial institution is unable to locate, or match, the
tax payments.
numbers entered in a payment record with account information they have on
file for a given taxpayer, they reject (return) the direct debit request.
Providers should caution taxpayers to ensure, before they e-file, that their
financial institution allows EFW requests from the designated account. Some
credit unions do not permit direct debits from share accounts.
Taxpayers can schedule a 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
later. For returns transmitted after the due date, the payment date must be
the same as the date the Provider transmitted the return. The taxpayer must
authorize EFW payments by completion of a payment record at the time the
balance due return or form is e-filed.
Taxpayers can make payments by EFW for the following:
n
Current year – Form 1040 series return;
n Form
4868, Application for Automatic Extension of Time to File U.S.
Individual Income Tax Return;
n Form
2350, Application for Extension of Time to File U.S. Income Tax
Return for Citizens and Resident Aliens Abroad Who Expect to Qualify
for Special Tax Treatment; and,
16
n Form
1040-ES, Estimated Tax for Individuals. Taxpayers can make up to
four estimated tax payments at the time that they electronically file the Form
1040 series return.
Providers should be careful to ensure that all the information needed for the
EFW request is included with the return. The payment record must include
the following:
n Routing
Transit Number (RTN);
n
Bank account number;
n
Type of account (checking or savings);
n
Requested payment date (e.g., YYYYMMDD); and,
n
Amount of tax payment for balance due payments sent after the due date;
this amount may include interest and penalty payment.
Taxpayers may also pay
electronically using a
If taxpayers do not provide all of the needed information, Providers must
credit or debit card.
contact the taxpayers. If the Provider is unsuccessful in obtaining or transmit-
Taxpayers can make
ting the EFW information, but the return is otherwise complete, the Provider
should proceed with the origination of the electronic return data to the IRS.
The Provider must inform their clients that they need to make other arrangements to pay the balance due and/or estimated payments. See below for
other payment options.
Credit or Debit Card Payments,
Taxpayers may also pay electronically using a credit or debit card. Taxpayers
can make credit or debit card payments when e filing or separately via telephone or the Internet.
n Integrated e-file and e-pay:
Taxpayers can e-file and, at the same time,
pay the balance due by credit or debit card if the tax software used includes
this option. The software prompts taxpayers to enter the necessary card
information. The service provider charges convenience fees to taxpayers
based on the amount of the tax payment and informs them of these fees
before taxpayers authorize the payments.
n 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 provider charges a convenience fee
based on the amount of the tax payment. The software advises taxpayers of
this fee during the transaction, and they can choose to end the transaction
before the payment is completed and confirmed. The software provides a
confirmation number at the end of the transaction. EROs should inform tax-
17
credit or debit card
payments when e-filing
or separately via telephone or the Internet.
payers of this option and advise them that fees may vary between
service providers.
n
An ATM/debit card payment option is available through the service
providers. Pay by phone or internet using a Visa® consumer debit card or
a MasterCard® consumer debit card. You can also pay with an ATM/debit
card with the NYCE®, PULSE® or STAR® logos. The service provider charges
a convenience fee per payment transaction.
Taxpayers can make payments by phone or the Internet via credit or debit
card for the following:
n
Current year Form 1040 series returns, including balance due notices;
n
Prior year Form 1040 series returns (applies to past due payments where
no Installment Agreement exists);
n Form
4868, Application for Automatic Extension of Time to File
U.S. Individual Income Tax Return;
Individual taxpayers
who make more than
n Form
1040-ES, Estimated Tax for Individuals;
one tax payment
n Form
1040X, Amended U.S. Individual Income Tax Return;
per year, particularly
n Form
1040, Advance Payment of a determined deficiency;
installment or Form
n Form
5329, Additional Taxes on Qualified Plans (Including IRAs) and
1040 estimated pay-
Other Tax-Favored Accounts;
ments, find EFTPS
n Trust
very convenient.
Fund Recovery Penalty; and,
n Installment
Agreement payments.
Electronic Federal Tax Payment System (EFTPS),
Individual taxpayers who make more than one tax payment per year,
particularly installment or Form 1040 estimated payments, find EFTPS very
convenient. Taxpayers can enroll in EFTPS via the Internet at EFTPS.gov or
by completing Form 9783, Individual Enrollment Form for EFTPS, and mailing
it to the EFTPS Enrollment Center. After EFTPS processes the enrollment,
taxpayers receive two separate mailings. One is a Confirmation/Update
Form. The other is a letter that includes the taxpayers’ Enrollment Trace
Number, Personal Identification Number (PIN) and instructions on how to
obtain an Internet Password. Once taxpayers receive the PINs, they may
begin making payments by phone. After the taxpayers obtain their Internet
Password, they may begin making payments via the Internet. With EFTPS,
taxpayers only need to enroll once to make a payment by both telephone and
the Internet, as the payment methods are interchangeable. Payments can be
made 24 hours a day/7 days a week; however, taxpayers must submit their
tax payment instructions to EFTPS before 8:00 p.m. ET at least one calendar
18
day prior to the tax due date. Taxpayers can schedule individual tax payments up to 365 days in advance.
Pay by Check ,
Taxpayers may pay the balance due by mailing a check accompanied by
Form 1040-V, Payment Voucher. 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. Taxpayers do not have to mail these
vouchers at the same time the Provider transmits the electronic return. For
example, the return may be transmitted in January and the taxpayer may
mail the payment and voucher at any time on or before the return due date.
Taxpayers who cannot
pay the amount they
owe for Form 1040
series returns and
owe $25,000 or less
Installment Agreement Requests,
in combined taxes,
Taxpayers who cannot pay the amount they owe for Form 1040 series
interest and penalties
returns and owe $25,000 or less in combined taxes, interest and penalties
may use the Online
may use the Online Payment Agreement (OPA) application to request an
Payment Agreement
installment agreement. They can also submit Form 9465, Installment
(OPA) application to
Agreement Request, to the IRS. The Provider can transmit Form 9465
request an installment
electronically (if supported by software) with the taxpayer’s electronic return
agreement.
data, or it may submit it later, electronically or on paper. If accepted, the IRS
charges a user fee for setting up the installments.
Signing an Electronic Tax Return,
As with an income tax return submitted to the IRS on paper, the taxpayer
and paid preparer (if applicable) must sign an electronic income tax return.
Taxpayers must sign individual income tax returns electronically. There are
currently two methods for signing individual income tax returns electronically
(see Electronic Signature Methods, below).
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 taxpayer’s Consent to Disclosure. The Consent to Disclosure authorizes the IRS to disclose information to the taxpayers’
Providers. Taxpayers authorize Intermediate Service Providers, Transmitters
and EROs to receive from the IRS an acknowledgement of receipt or reason
for rejection of the electronic return, 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 original, and
19
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 Signature Methods,
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.
Self-Select PIN is one of these methods. The Self-Select PIN method
requires taxpayers to provide their prior year Adjusted Gross Income (AGI)
If assistance is
amount or prior year PIN for use by the IRS to authenticate the taxpayers.
needed call IRS
EROs should encourage taxpayers who do not have their original prior year
Tax Help at
AGI or PIN to request an Electronic Filing PIN on IRS.gov. If assistance is
(800) 829-1040.
needed call IRS Tax Help at (800) 829-1040.
This method may be completely paperless if the taxpayers enter their own
PINs directly into the electronic return record using key strokes after reviewing the completed return. Taxpayers may also authorize EROs to enter PINs
on their behalf, in which case the taxpayers must review and sign a completed signature authorization form after reviewing the return. Also, see IRS
e-file Signature Authorization below.
Practitioner PIN is the other method and it does not require the taxpayer
to provide their prior year AGI amount or prior year PIN. When using this
method, taxpayers must always appropriately sign a completed signature authorization form (see IRS e-file Signature Authorization). Taxpayers, who use
the Practitioner PIN method and enter their own PINs in the electronic return
record after reviewing the completed return, must still appropriately sign the
signature authorization form.
Regardless of the method of electronic signature used, taxpayers may
enter their own PINs; EROs may select and enter the taxpayers’ PINs; or the
software may generate the taxpayers’ PINs; in the electronic return. After
reviewing the return, the taxpayers must agree by signing an IRS e-file
signature authorization containing the PIN.
The following taxpayers are ineligible to sign individual income tax returns
with an electronic signature using the Self-Select PIN:
n
Primary taxpayers under age sixteen who have never filed; and,
n
Secondary taxpayers under age sixteen who did not file the prior tax year.
EROs should advise taxpayers to keep a copy of their completed tax return to
assist with authentication in the subsequent year.
20
IRS e-file Signature Authorization,
When taxpayers 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 signing the appropriate completed IRS e-file signature authorization form.
Form 8879, IRS e-file Signature Authorization, authorizes an ERO to enter the
taxpayers’ 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 the taxpayers’ PINs on Forms 4868 and 2350. Note: Form 8878 is
only required for Forms 4868 when taxpayers are authorizing an electronic
funds withdrawal and want an ERO to enter their PINs.
The ERO may enter the taxpayers’ PINs in the electronic return record be-
The ERO may enter
fore the taxpayers sign Form 8878 or 8879, but the taxpayers must sign and
the taxpayers’ PINs in
date the appropriate form before the ERO originates the electronic submis-
the electronic return
sion of the return. The taxpayer must sign and date the Form 8878 or Form
record before the
8879 after reviewing the return and ensuring the tax return information on
taxpayers sign Form
the form matches the information on the return. The taxpayer may return the
8878 or 8879, but the
completed Form 8878 or Form 8879 to the ERO by hand delivery, U.S. mail,
taxpayers must sign
private delivery service, fax, email or an Internet website.
and date the appropri-
EROs may use an electronic signature pad to have taxpayers sign Forms
8878 and 8879. Taxpayers must be present in the ERO’s office where the
electronic signature pad is located to sign using the signature pad. The ERO
must retain the forms with the taxpayers’ signatures and provide a copy to
the taxpayer upon request.
Only 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 ERO must enter the line items
from the paper return on the applicable Form 8878 or Form 8879 prior to the
taxpayers signing and dating 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
Form 8878 or Form 8879 for the Practitioner PIN method of electronic signature.
Electronic Signatures for EROs,
EROs must also sign with a PIN. EROs should use the same PINs for the
entire tax year. The ERO may manually input or the software can generate the
PIN in the electronic record in the location designated for the ERO Electronic
Filing Identification Number (EFIN)/PIN. The ERO is attesting to the ERO
Declaration by entering a PIN in the ERO EFIN/PIN field. For returns prepared
21
ate form before the
ERO originates the
electronic submission
of the return.
by the ERO firm, return preparers are declaring under the penalties of perjury
that they reviewed the returns and they are 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 ERO must enter the return preparer’s
identifying information (name, address, EIN, when applicable and PTIN) in the
electronic return.
EROs may authorize members of their firms or designated employees to
sign for them, but the EROs are still responsible for all the electronic returns
originated by their firms.
EROs may autho-
EROs may sign Forms 8878 and 8879 by rubber stamp, mechanical device
(such as signature pen) or computer software program as described in Notice
2007-79. The signature must include either a facsimile of the individual ERO’s
signature or of the ERO’s printed name. EROs using one of these alternative
rize members of
their firms or designated employees
means are personally responsible for affixing their signatures to returns or
to sign for them,
requests for extension. This does not alter the requirement that taxpayers
but the EROs are
must sign Form 8878 and Form 8879 by handwritten signature or electronic
still responsible for
signature.
all the electronic
The ERO must retain Forms 8878 and 8879 for three years from the return
due date or the IRS received date, whichever is later. EROs must not send
Forms 8878 and 8879 to the IRS unless the IRS requests they do so.
Electronic Signature Guidance for Forms 8878 and 8879,
Electronic signatures appear in many forms, and may be created by many
different technologies. No specific technology is required. Examples of
currently acceptable electronic signature methods include:
n
A handwritten signature input onto an electronic signature pad;
n
A handwritten signature, mark or command input on a display screen by
means of a stylus device;
n
A digitized image of a handwritten signature that is attached to an
electronic record;
n
A typed name (e.g., typed at the end of an electronic record or typed into
a signature block on a website form by a signer);
n
A shared secret (e.g., a secret code, password or PIN) used by a person
to sign the electronic record;
n
A digital signature; or ,
n
A mark captured as a scalable graphic.
22
returns originated
by their firms.
The software must record the following data:
n
Digital image of the signed form;
n
Date and time of the signature;
n
Taxpayer’s computer IP address (Remote transaction only);
n
Taxpayer’s login identification — user name (Remote transaction only);
n
Identity verification: taxpayer’s knowledge based authentication passed
results and for in-person transactions, confirmation that government picture
identification has been verified; and,
n
Method used to sign the record, e.g., typed name; or a system log; or other
audit trail that reflects the completion of the electronic signature process by
Ensuring the validity
the signer.
of any electronically
Note: The ERO must provide this information upon request.
signed record begins
with identification and
Identity Verification Requirements,
authentication of the
The electronic signing process must be associated with a person, and ac-
taxpayer.
cordingly, ensuring the validity of any electronically signed record begins with
identification and authentication of the taxpayer. The electronic signature
process must be able to generate evidence of the person the electronic form
of signature belongs to, as well as generate evidence that the identified person is actually associated with the electronic record. If there is more than one
taxpayer for the electronic record, the electronic signature process must be
designed to separately identify and authenticate each taxpayer.
The identity verification requirements must be in accordance with National
Institute of Standards and Technology Special Publication 800-63, Electronic
Authentication Guideline, Level 2 assurance level and knowledge based
authentication or higher assurance level.
In-Person Transaction,
The ERO must inspect a valid government picture identification; compare
picture to applicant; and record the name, social security number, address
and date of birth. Verify that the name, social security number, address,
date of birth and other personal information on record are consistent with
the information provided through record checks with the applicable agency
or institution or through credit bureaus or similar databases. For in-person
transactions, the record checks with the applicable agency or institution or
through credit bureaus or similar databases are optional.
Examples of government picture identification (ID) include a driver’s
license, employer ID, school ID, state ID, military ID, national ID, voter ID,
visa or passport.
If there is a multi-year business relationship, you should identify and
authenticate the taxpayer.
23
Remote Transaction,
The electronic return originator must record the name, social security number, address and date of birth. Verify that the name, social security number,
address, date of birth and other personal information on record are consistent with the information provided through record checks with the applicable
agency or institution or through credit bureaus or similar databases.
Identity Verification Failure,
If an ERO is unable to complete identity verification after three attempts, the
ERO must obtain a handwritten signature.
Electronic Records,
Electronic signatures must be linked to their respective electronic records
to ensure that the signatures cannot be excised, copied or otherwise transferred to falsify an electronic record. After the electronic record has been
signed, it must be tamper-proof. Therefore, techniques must be employed
Storage systems
must have secure
access control to
ensure that the
that lock a document and prevent it from being modified. Storage systems
electronic records
must have secure access control to ensure that the electronic records cannot
cannot be modified.
be modified. Additionally, storage systems must also contain a retrieval system that includes an indexing system, and the ability to reproduce legible and
readable hardcopies of electronically stored records.
Submitting the Electronic Return
to the IRS,
Once signed, an ERO must originate the electronic submission of a return
as soon as possible. EROs must not electronically file individual income
tax returns prior to receiving Forms W-2, W-2G or 1099-R. If the taxpayer is
unable to secure and provide a correct Form W-2, W-2G, Certain Gambling
Winnings, or 1099-R, Distributions from Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance Contracts, etc., the ERO may electronically file the return after the taxpayer completes Form 4852, Substitute for
Form W-2, Wage and Tax Statement or 1099-R, Distributions from Pensions,
Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts,
etc., 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 ERO must
maintain Form 4852 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 is,
24
n
collecting returns from taxpayers or from another Authorized IRS e-file
Provider prior to official acceptance in IRS e-file; or,
n
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.
The IRS does not consider current filing year returns held prior to the date
it accepts transmission of electronic returns stockpiled. EROs must advise
taxpayers that it cannot transmit returns to the IRS until the date the IRS accepts transmission of electronic returns. Although holding late returns during
periods when IRS electronic filing is not available is not stockpiling, Providers
should mail the returns to the IRS mailing addresses in the form’s instructions.
Internet Protocol Information ,
Internet Protocol (IP) information of the computer the ERO uses to prepare
the return (or originate the electronic submission of collected returns) must
be included in all individual income tax returns. The required Internet Protocol
information includes:
n
Public/routable IP address,
n
IP date,
n
IP time ,
n
IP time zone ,
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.
With many different ERO e-filing business models, the computer used to
prepare (or originate the electronic submission of collected returns) may not
have a public/routable IP address. If the computer used for preparation (or
origination of the electronic submission of collected returns) is on an internal
reserved IP network, then the IP address should be the public/routable IP
address of the computer used to submit the return. If the computer used for
preparation (or origination of the electronic submission of collected returns)
is used to transmit the return to the IRS, then the IP address should be the
public/routable IP address of that computer. If it is not possible to capture the
public/routable IP address, then the ERO or software may have to hard code
the IP address into each return.
The IRS will reject individual income tax returns e-filed without the required
IP address. Any return received by the IRS containing a private/non-routable
IP address will be flagged in the Acknowledgement File with an “R” in the
Reserved IP Address Code field of the ACK key record indicating that a
reserved IP address is present for the return.
25
Submission of Paper Documents to the IRS,
IRS e-file returns must contain all the same information as returns filed completely on paper. Forms that have an electronic format must be submitted in
the electronic format unless IRS identifies an exception during the tax year.
If a form/document can’t be submitted electronically, IRS can accept forms/
documents in PDF format. Check the software package to see if this option
is offered. EROs are responsible for ensuring that they submit to the IRS all
paper documents required to complete the filing of returns. If the documents
are not submitted electronically, they may be mailed to IRS. Attach all appropriate supporting documents that the IRS requires to the Form 8453, U.S.
Individual income Tax Transmittal for an IRS e-file Return, and send them to
EROs are responsible
the IRS. Refer to page 2 of Form 8453 for the current mailing address. Below
for ensuring that they
is a list of these supporting documents:
submit to the IRS all
n
Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes (or
equivalent contemporaneous written acknowledgement);
n
Form 2848, Power of Attorney and Declaration of Representative (only for
an electronic return signed by an agent);
n
Form 3115, Application for Change in Accounting Method;
n
Form 3468 - attach a copy of the first page of NPS Form 10-168a, Historic
Preservation Certification Application (Part 2 - Description of Rehabilitation),
with an indication that it was received by the Department of the Interior or the
State Historic Preservation Officer, together with proof that the building is a
certified historic structure (or that such status has been requested);
n
Form 4136 - attach the Certificate for Biodiesel and, if applicable, State-
ment of Biodiesel Reseller or a certificate from the provider identifying the
product as renewable diesel and, if applicable, a statement from the reseller;
n
Form 5713, International Boycott Report;
n
Form 8283, Noncash Charitable Contributions, Section A, (if any
statement or qualified appraisal is required) or Section B, Donated Property,
and any related attachments (including any qualified appraisal or partnership
Form 8283);
n
Form 8332, Release of Claim to Exemption for Child of Divorced or
Separated Parents (or certain pages from a post-1984 decree or agreement,
see instructions);
n
Form 8858, Information Return of U.S. Persons With Respect to Foreign
Disregarded Entities;
n
Form 8864 - attach the Certificate for Biodiesel and, if applicable, State-
ment of Biodiesel Reseller or a certificate from the provider identifying the
product as renewable diesel and, if applicable, a statement from the reseller;
26
paper documents
required to complete
the filing of returns.
n
Form 8885, Health Coverage Tax Credit, and all required attachments;
n
Form 8949, Sales and Other Dispositions of Capital Assets, (or a statement
with the same information), if you elect not to report your transactions electronically on Form 8949,
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.
ERO Duties after Submitting the
Return to the IRS,
Record Keeping and Documentation Requirements,
EROs must retain the following material/documents listed below until the
end of the calendar year at the business address from which it originated the
return or at a location that allows the ERO to readily access the material as it
must be available at the time of IRS request. An ERO may retain the required
Forms 8878 and 8879
records at the business address of the Responsible Official or at a location
must be available to
that allows the Responsible Official to readily access the material during any
the IRS for three years
period of time the office is closed, as it must be available at the time of IRS
from the due date of
request through the end of the calendar year.
the return or the IRS
n
A copy of Form 8453, U.S. Individual Income Tax Transmittal for an
IRS e-file Return, and supporting documents that are not included in the
electronic records submitted to the IRS;
n
Copies of Forms W-2, W-2G and 1099-R;
n
A copy of signed IRS e-file consent to disclosure forms;
n
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,
n The
acknowledgement file for IRS accepted returns.
Forms 8878 and 8879 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. The Submission ID must be associated with
Form 8878 and 8879:
n
The Submission ID can be added to the Form 8878 and 8879 or ,
n
the acknowledgment containing the Submission ID can be associated with
Forms 8878 and 8879.
27
received date, whichever is later.
If the acknowledgement is used to identify the Submission ID, the acknowledgement must be kept in accordance with published retention requirements
for Forms 8878 and 8879. The acknowledgement is not required to be
physically attached to Form 8878 and 8879; it can be electronically stored.
EROs may electronically image and store all paper records they are
required to retain for IRS e-file. This includes 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 8878 and 8879. The storage
system must satisfy the requirements of Revenue Procedure 97-22, 1997-1
C.C. 652, Retention of Books and Records. In brief, the electronic storage
system must ensure an accurate and complete transfer of the hard copy to
EROs may elec-
the electronic storage media. The ERO must be able to reproduce all records
tronically image
with a high degree of legibility and readability (including the taxpayers’
signatures) when displayed on a video terminal and when reproduced in
hard copy.
and store all paper
records they are
required to retain
Providing Information to the Taxpayer ,
The ERO must provide a complete copy of the return to the taxpayer. EROs
may provide this copy in any media, including electronic, that is acceptable
to both the taxpayer and the ERO. A complete copy of a taxpayer’s return
includes Form 8453 and other documents that the ERO cannot electronically
transmit, 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, the ERO must
reference data entries 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, the ERO does not have to provide a printout of
the electronic portion of the return 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 taxpayers that, if
needed, they must file an amended return as a paper return and mail it to the
submission processing center that would handle the taxpayer’s paper return.
Refer to the current year’s tax instructions 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 IRS considers them “filed”
as soon as the return is signed electronically or through the receipt by the
28
for IRS e-file.
IRS of a paper signature. Rejected returns fail to meet processing criteria
and the IRS considers them not filed. The acknowledgment identifies the
source of the problem using a system of business rules and element names
(tag names). The business rules tell why the return rejected and the element
names tell which fields of the electronic return data are involved. Information
regarding business rules and correcting common errors is available on
IRS.gov.
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 an elected EFW paid a balance due, and if a
private/non-routable IP address is present in the return. The ERO should
check acknowledgement records regularly to identify returns requiring follow
up action and should take reasonable steps to address issues identified on
The ERO should check
acknowledgement
records regularly to
identify returns requir-
acknowledgement records.
At the request of the taxpayer, the ERO must provide the Submission ID
ing follow up action and
and the date the IRS accepted the electronic individual income tax return
should take reasonable
data. The ERO may use Form 9325, Acknowledgment and General Informa-
steps to address issues
tion for Taxpayers Who File Returns Electronically for this purpose. If re-
identified.
quested, the ERO must also 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 on the original 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”. The ERO must give taxpayers
copies of the new electronic return data.
If the State submission is linked to an IRS submission (also referred to as a
Fed/State return), the IRS will check to see if there is an accepted IRS submission under that Submission ID. If there is not an accepted federal return
for that tax type, the IRS will deny the State submission and an acknowledgement will be sent to the transmitter. The state has no knowledge that the state
return was denied (rejected) by the IRS. Subsequent rejection of state electronic return data by a state tax administration agency does not affect federal
electronic return data accepted by the IRS. States determine when they
accept as filed state electronic return data received from the Federal/State
e-file Program. Contact the state tax administration agency when problems
or questions arise.
29
Resubmission of Rejected Tax Returns,
If the IRS rejects the electronic portion of a taxpayer’s individual income tax
return for processing, and the ERO cannot rectify the reason for the rejection,
the ERO must take reasonable steps to inform the taxpayer of the rejection
within 24 hours. When the ERO advises the taxpayer that it has not filed the
return, 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 the IRS cannot
accept the return for processing, the taxpayer must file a paper return. In
order to timely file the return, the taxpayer must file the paper return by the
later of the due date of the return or ten calendar days after the date the IRS
EROs should tell
gives notification that it rejected the electronic portion of the return or that
taxpayers how
the return cannot be accepted for processing. Taxpayers should include an
to follow up on
explanation in the paper return as to why they are filing the return after the
returns and refunds
due date.
by pointing out the
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 IRS.gov. If taxpayers do not have
access to the Internet, the ERO should provide taxpayers with the IRS TeleTax
return information number, (800) 829-4477. Either of these options gives the
date of depositing or mailing of their refund.
Before checking on refunds, taxpayers should wait at least three weeks
from the time the IRS acknowledges acceptance of the return data. Because
the IRS updates refund information each weekend, EROs should advise
taxpayers not to check more than once a week to avoid checking with no
possibility of success.
To check on refunds, taxpayers 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.
If taxpayers do not receive their direct deposit within one week (refund
check within 30 days) of the date given, they may call the Refund Hotline
number at (800) 829-1954, which has information about taxpayers’ refunds
(when it becomes available).
Refund Delays,
Taxpayers often ask EROs to help them when refunds take longer than
expected. The IRS may delay refunds for a number of reasons, including the
following:
30
Where’s My Refund
feature on IRS.gov.
n
Errors in Direct Deposit information (refunds then sent by check);
n Financial
institution refusals of Direct Deposits (refunds then sent by check)
or delays in crediting the Direct Deposit to the taxpayer’s account;
n
Estimated tax payments differ from amount reported on tax return (for exam-
ple, fourth quarter payments not yet on file when return data is transmitted);
n Bankruptcy;
n
Inappropriate claims for the Earned Income Tax Credit; or,
n
Recertifications to claim the Earned Income Tax Credit.
The IRS sends a letter or notice explaining the issue(s) and how to resolve the
issue(s) to the taxpayer when it delays a refund. The letter or notice contains
the contact telephone number and address for the taxpayer to use for further
assistance.
If taxpayers’ refunds are lost or misapplied, taxpayers do not receive notices
or letters or there is no information on Where’s My Refund or the Refund
Hotline (see Advising Taxpayers about Refund Inquiries in this chapter), EROs
should advise taxpayers to call the IRS taxpayer assistance number.
FMS sends
taxpayers offset
Refund Offsets,
notices if it applies
The IRS offsets as much of a refund as is needed to pay overdue taxes owed
any part of their
by taxpayers and notifies them when this occurs. The Financial Management
refund to
Service (FMS) offsets taxpayers’ refunds through the Treasury Offset Program (TOP) to pay off past-due child support, federal agency non-tax debts
such as student loans and state income tax obligations. 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 the agency submitted their debts for
refund offset. FMS sends taxpayers offset notices if it applies any part of their
refund 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 taxpayers need further clarification,
they may call the Treasury Offset Program Call Center at (800) 304-3107. If
a refund is in a joint name but only one spouse owed the debt, the “injured
spouse” should file Form 8379, Injured Spouse Allocation.
31
non-tax debts.
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 a 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 advises the VITA or TCE sponsor how
to submit or transmit returns. Some options available to the IRS include:
n
Submission of returns by VITA or TCE sponsors on paper, magnetic disk
or in an electronic transmission to a designated IRS office;
n
Submission of returns by VITA or TCE sponsors via direct transmission
For IRS sponsored
to the IRS; or,
programs, unless
n
otherwise noted, all
Submission of returns by VITA or TCE sponsors through a third party
Transmitter.
requirements of a
A VITA or TCE sponsor can only accept a return for electronic filing that meets
Provider apply.
the criteria for VITA or TCE assistance. A VITA or TCE sponsor may accept for
electronic filing only the returns and accompanying forms and schedules included in a VITA or TCE training course. A VITA or TCE sponsor may collect a
fee only if it directly relates 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 transmits 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 it offers the VITA
or TCE service 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 and Form 8453, U.S. Individual
Income Tax Transmittal for an IRS e-file Return. The VITA or TCE sponsor,
or the IRS, must retain this information. The VITA or TCE sponsor must not
give this information to a third party, including a third party Transmitter. The
IRS is responsible for ensuring that the taxpayer sends Form 8453 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 IRS submission processing center.
See Publication 3189, Volunteer e-file Administration Guide for additional
information. It is designed as a resource guide to assist volunteer e-file
32
administrators in implementing the correct electronic filing procedures at a
volunteer e-file site. The publication provides guidance on IRS standards for
volunteer sites, administrative procedures in using the software products
(Desktop and Online), and samples of the types of e-file documents needed
to successfully operate a volunteer e-file site.
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.
n
offer electronic filing
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
directly relates to defraying the actual cost of transmitting the electronic portion of the tax return.
n
An employer may
The employer must retain copies of tax returns, including Forms 8453 and
IRS e-file Signature Authorizations. It must not give this information to a third
party, including a third party Transmitter.
33
as an employee benefit
whether the employer
chooses to transmit
tax returns or contracts
with a third party to
transmit the tax returns.
Chapter 4
,
Transmission
,
Requirements,
In fulfilling the requirements of an Authorized IRS e-file Provider (Provider)
participating in IRS e-file, Transmitters must:
1. Transmit all electronic portions of returns within three calendar days of
receipt;
Note: This requirement does not apply when the IRS is not accepting specific
returns, forms, or schedules until a date later than the start-up of IRS e-file
due to constraints such as late legislation, programming issues and controlled
validation activities, etc. Controlled validation activities are when the IRS
provides special instructions to Transmitters relating to the submission of
certain returns.
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 non receipt of Personal Identification Number (PIN), etc. to the
Electronic Return Originator (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 number, 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 number, 866-255-0654, for assistance if
the electronic portion of the return has been rejected after three transmission
attempts;
34
8. Ensure the security of all transmitted data;
9. Ensure against the unauthorized use of its Electronic Filing Identification
Number (EFIN) or Electronic Transmitter Identification Number (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.
Additional Requirements for Transmitters
Participating 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 includes their assigned Online Filing EFIN, which begins with
10, 21, 32, 44, or 53, in the appropriate field in the electronic return data;
2. Ensure that the Intermediate Service Provider’s EFIN is included in the
electronic return data, when applicable;
3. Assign a Submission ID to the electronic portion of each return received
from a taxpayer;
4. Include the assigned Submission ID in the transmission of the electronic
return data to the IRS;
5. 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;
6. 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;
7. Provide the Internet Protocol (IP) information (public/routable IP Address,
IP Date, IP Time and IP Time Zone of the computer the taxpayer uses to submit the return);
8. 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 and time zone of the computer receiving it;
9. Include the letter “Online Filer” in the “Originator Type” field of the Trans
Record “A”.
35
In addition to
requirements of all
Transmitters in the
IRS e-file Program,
a Transmitter that
participates in
Online Filing has
some additional
responsibilities.
The Transmitter must notify the taxpayer of the following if the IRS accepts
the electronic portion of a taxpayer’s return:
n
The date the transmission was accepted;
n
The Submission ID;
n
The requirement to properly complete and timely submit a Form 8453, if
required, with accompanying paper documents;
n
The appropriate submission processing center’s address to which Form
8453 with accompanying paper documents, if required, must be sent;
n
That the IRS must receive a Form 8453, if required, 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:
n
That the IRS rejected the electronic portion of the taxpayer’s return:
n
The date of the rejection;
n
What the reject code(s) means;
n
What steps the taxpayer needs to take to correct the errors that caused the
provide an electronic
postmark to taxpayers that file Individual
Income Tax Returns and
rejection; and,
n
A Transmitter may
Extensions of Time to
File Individual Income
That if the taxpayer chooses not to have the electronic portion of the return
corrected and transmitted to the IRS, or, if the IRS cannot accept the electronic portion of the return for processing by the IRS, the taxpayer must file a
paper return. In order to timely file a paper return, the taxpayer must file it by
the later of the due date of the return or ten calendar days after the date the
IRS gives notification that it has rejected the electronic portion of the return or
that it cannot accept the return for processing. Taxpayers should include an
explanation as to why they are filing the paper return 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.
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
taxpayer resides to determine the postmark’s actual time. For example, if the
36
Tax Returns.
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 IRS receives the return after the prescribed deadline for filing, the
IRS treats the return as timely filed. In order for the IRS to treat a return as
timely filed, based on the electronic postmark’s date, the taxpayer must meet
all requirements for signing the return and when applicable, mailing Form
8453 with supporting documents not included in the electronic record. If the
electronic postmark is after the prescribed deadline for filing, the IRS actual
receipt date, not the date of the electronic postmark, is the filing date. If the
IRS rejects a return, the taxpayer must file a corrected return in accordance
with the rules for timely filing corrected returns after rejection of an electronic
return.
The IRS authorizes a Transmitter 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
If the electronic
precludes alteration and manipulation of the electronic postmark information;
postmark is after
c) Provides the same electronic postmark data to the IRS in the electronic
the prescribed
record of the return;
deadline for filing,
d) Provides taxpayers with an explanation of the electronic postmark and
the IRS actual
when the IRS treats the electronic postmark as the filing date;
receipt date, not
e) Refrains from using terms that currently have specific meaning in the
the date of the
postal industry such as “certified” or “registered” and similar terms, and
electronic postmark,
from using “Internal Revenue Service”, “IRS” or “Federal” as a definer of the
is the filing date.
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 the Transmitter received through the last date for
37
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 Providers participate in Federal/State e-file, software should meet both
IRS and state specifications. However, before electronic return data can be
transmitted (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.
If Providers participate
in Federal/State e-file,
software should meet
both IRS and state
specifications.
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 (Providers), including intermediate service and software
development.
Intermediate Service Providers,
An Intermediate Service Provider receives tax information from an Electronic
Return Originator (ERO) (or from a taxpayer who files electronically using a
personal computer 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).
A 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 TINs and addresses on a Form W-2, W-2G, 1099-R or
Schedule C as applicable in the electronic return record when they differ from
the taxpayer’s TINs or address on the electronic individual income tax return
as described in Verifying Taxpayer Identification Numbers (TINs) and Be
Careful with Addresses if inputting the electronic data; and
5. Send any return needing changes as described in Chapter 3 back to the
ERO for correction.
39
An Intermediate Service
Provider receives tax
information, processes
the tax return information and either forwards
the information to a
Transmitter or sends the
information back to the
ERO or taxpayer.
Additional Requirements for Intermediate Service
Providers Participating in Online Filing,
When the taxpayer files a return 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 Online Filing EFIN which begins with 10, 21, 32, 44
and 53;
2. Ensure that its Online Filing EFIN is included in the appropriate field in the
electronic return data;
3. Send the transmission to the Transmitter within 24 hours of the receipt of
the return from the taxpayer;
4. Ensure that no more than five tax returns are filed electronically by one
software package or from one e mail address;
5. Ensure that software used by the taxpayer does not have an IRS assigned
production password built into the software; and,
6. Immediately forward to the taxpayer information received from the Trans-
When the taxpayer
files a return using
Online Filing, the
Intermediate
Service Provider
processes information for a taxpayer
so that a Transmitter
mitter as required for Online Filing. For example, a Transmitter receives
can send the elec-
information from the IRS regarding the status of the electronic portion of a
tronic return(s) to
taxpayer’s return. See Additional Requirements for Participants in Online Filing.
the IRS.
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. Software
Developers may find information about Modernized e-File (MeF) schemas in
Publication 4164, Modernized (MEF) e-File Guide for Software Developers
and Transmitters and on IRS.gov. Software Developers must pass Assurance
Testing System (ATS) as prescribed in Publication 1436, Test Package for
Electronic Filers of Individual Income Tax Returns.
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 its software contains appropriate language and version indicators for Consent To Disclose and Jurat statements;
40
3. Ensure software contains IRS e-file Signature Authorization; and,
4. Ensure its software allows for input of different addresses on appropriate
forms and schedules when they differ from the taxpayer’s address in the
electronic individual income tax return. Also, require the manual key entry
of the Taxpayer Identification Number (TIN) as it appears on Form W-2 for
taxpayers with Individual Taxpayer Identification Numbers (ITINs) who are
reporting wages.
Additional Requirements for Software Developers
Participating 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, U.S. Individual Income Tax
Transmittal for an IRS e-file Return, that can be printed and used by a taxpayer to mail supporting documents to IRS;
4. Ensure that its software contains a payment voucher that can be printed
A Software Developer
and used by a taxpayer to file with the IRS;
must ensure its soft-
5. Provide a copy of the software and accompanying documentation (a
ware allows for input
demonstration package is sufficient) to the IRS Headquarters Online Filing
of different addresses
Analyst upon successful completion of testing (See Chapter 6 for address);
on appropriate forms
and,
and schedules when
6. Ensure the Internet Protocol (IP) statement is present.
they differ from the
taxpayer’s address.
Additional Requirements for Software Developers
Enabling Electronic Signatures for Forms 8878 and 8879,
A Software Developer that enables electronic signatures for Forms 8878 and
8879 must:
1. Provide the following in an accessible format (including print capability) for
the electronic return originator:
n
Digital image of the signed form;
n
Date and time of the signature;
n
Taxpayer’s computer IP address (Remote transaction only);
n
Taxpayer’s login identification – user name (Remote transaction only);
41
n
Identity verification: taxpayer’s knowledge based authentication
passed results and for in-person transactions, confirmation that
government picture identification has been verified; and,
n
Method used to sign the record, (e.g., typed name); or a system log;
or other audit trail that reflects the completion of the electronic signature
process by the signer.
2. Comply with the identity verification requirements.
3. Ensure software disables identity verification after three attempts.
4. Ensure identity verification transactions occur in a secure portal.
5. Ensure the electronic record that has been signed is tamper-proof.
6. Ensure storage system has secure access controls.
7. Ensure storage system contains a retrieval system that includes an
indexing system.
8. Ensure software can reproduce legible and readable hardcopies of
Form 8878 or 8879.
9. Ensure software does not allow tax return transmission until Form 8879
is signed.
A Software
Developer that
enables electronic
signatures must
ensure the electronic record that
has been signed
is tamper-proof.
See “Electronic Signature Guidance for Forms 8878 and 8879” section for
detailed information.
42
IRS e-file Rules
and Requirements
Chapter 6
,
,
All Authorized IRS e-file Providers (Providers) must adhere to IRS e-file rules
and requirements to continue participating in IRS e-file. Requirements are
included in Revenue Procedure 2007-40, throughout this publication and in
other publications and notices that govern IRS e-file (See Publication 3112,
Applying and Participating in IRS e-file). All Providers must adhere to all rules
and requirements, 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 Providers of individual income tax returns, except
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;
3. Properly use the standard/non standard Form W-2 indicator;
4. Properly use the Refund Anticipation Loan (RAL) indicator;
5. Include the Electronic Return Originator’s (ERO’s) Electronic Filing
Identification Number (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.
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 Submission ID;
43
All Authorized IRS
e-file Providers (Providers) must adhere
to IRS e-file rules and
requirements to continue participating in
IRS e-file.
3. Submit any changes to the following information to the IRS Headquarters
Online Filing Analyst, SE:W:CAS:SP:ES:I, 5000 Ellin Road, Lanham, MD
20706, by the 31st day of December preceding the filing season:
n
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 Assurance
Financial institutions
Testing System (ATS) and the Professional Package name under which the
offer a variety of
software was tested must be reported;
financial products to
n
taxpayers based on
The Provider’s point of contact for matters relating to Online Filing and the
telephone number for the point of contact;
n
The applicant’s customer service number; and,
n
The procedures the applicant will use to ensure that one software package
or one e-mail address transmits no more than five returns.
Tax Refund-Related Products,
Tax refund-related products are financial products based on taxpayers
receiving a tax refund. Financial institutions offer a variety of financial products to taxpayers based on their refunds. Such products include a Refund
Anticipation Loan (RAL) which is money borrowed by a taxpayer from a
lender based on the taxpayer’s anticipated income tax refund, and a Refund
Anticipation Check (RAC) which directs the refund to a financial institution
which disburses fees and the balance to the taxpayer. The IRS is in no way
involved in or responsible for RALs, RACs or other financial products. Authorized IRS e-file Providers (Providers) that assist taxpayers in applying for a
tax refund-related financial product have additional responsibilities and may
be sanctioned by the IRS if they fail to adhere to the requirements below.
The Provider must:
n
Ensure taxpayers understand that by agreeing to a refund-related financial
product they will not receive their refund from the IRS as the IRS will send
their refund to the financial institution;
n
Advise taxpayers that RALs are interest bearing loans and not a quicker
way of receiving their refunds from the IRS;
n
Advise taxpayers that if the financial institution does not receive a Direct
Deposit within the expected time frame for whatever reason, the taxpayers
44
their refunds.
may be liable to the lender for additional interest and other fees, as applicable
for the RAL or other tax refund-related product (see explanation below);
n
Advise taxpayers of all fees and other known deductions to be paid from
There are no
their refund and the remaining amount the taxpayers will actually receive;
guarantees that the
n
Department of the
Secure the taxpayer’s written consent as specified in Treas. Reg.
§301.7216-3(a) to disclose tax information to the lending financial institution
Treasury deposits
in connection with an application for a tax refund-related product;
refunds within a
n
specified time or in
Ensure that if it is also the return preparer that it is not a related taxpayer
(within the meaning of §267 or §707A) to the financial institution or other
lender that makes a RAL agreement; and ,
n
Adhere to fee restrictions and advertising standards below.
There are no guarantees that the Department of the Treasury deposits
refunds within a specified time or in their entirety. For example, it may delay
a refund due to processing problems or, it may offset some or all of the
refund. The Department of the Treasury is not liable for any loss suffered by
taxpayers, Providers or financial institutions resulting from reduced refunds
or not honored Direct Deposits, causing it to issue refunds by check.
Fee Restrictions,
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 tax refund-related product, the
Provider may charge a flat fee for that assistance. The fee must be identical
for all customers and must not relate to the amount of the refund or the tax
refund-related product. The Provider must not accept from a financial institution for any service connected with a tax refund-related product a fee that is
contingent upon the amount of the refund or the 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 tax refund-related product.
Advertising Standards,
In addition to the advertising standards in Publication 3112, Applying and
Participating in IRS e-file, there are additional responsibilities for Authorized
IRS e-file Providers (Providers) of individual income tax returns.
Providers must not use improper or misleading advertising in relation to
IRS e-file, including the periods for refunds and tax refund-related products
including RALs. Any claims by Providers concerning faster refunds by virtue
45
their entirety.
of electronic filing must be consistent with the language in official IRS publications. If Providers advertise the availability of a RAL or other tax refundrelated product, the Provider and financial institution must clearly refer to or
describe the funds as a loan or other financial product, not as a refund. The
advertisement of a RAL or other tax refund-related product must be easy to
Providers must
identify and in readable print. That is, it must make clear in the advertising
not use improper
that the taxpayer is borrowing against the anticipated refund or receiving
or misleading
another tax refund-related product and is not obtaining the refund itself.
advertising in
A Provider must not advertise that individual income tax returns may be
relation to IRS
electronically filed prior to the Provider’s receipt of Forms W-2, W-2G and
e-file, including
1099-R, as the Provider is generally prohibited from electronically filing
the periods for
returns prior to receipt of Forms W-2, W-2G, and 1099-R. Advertisements
must not imply that the Provider does not need Forms W-2, W-2G and
1099-R, or that it can use pay stubs or other documentation of earnings to
e-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 uses it in
advertising pieces.
Disclosure of Tax Return Information,
Under Treas. Reg. §301.7216-d(1), disclosure of tax return information among
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 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 Treas. Reg. §301.7216-1(a) and/or the civil penalties in I.R.C. §6713
for unauthorized disclosure or use of tax return information.
Penalty Information for Authorized
IRS e-file Providers,
Preparer penalties may be asserted against an individual or firm meeting
the definition of a tax preparer under I.R.C. §7701(a)(36) and Treas. Reg.
§301.7701-15. Preparer penalties that may be asserted under appropriate
circumstances include, but are not limited to, those set forth in I.R.C. §§6694,
6695, 6701 and 6713.
46
refunds and tax
refund-related
products including
RALs.
Under §301.7701-15(c), Providers are not 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 non-substantive way, this alteration is considered to come
under the “mechanical assistance” exception described in §301.7701-15(c).
A non-substantive 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 IRS may hold the Provider liable for
income tax return preparer penalties. See Treas. Reg.§301.7701-15(c); Rev.
Rul. 85-189, 1985-2 C.B. 341 (which describes a situation where the Software
A non-substantive
Developer was determined to be an tax return preparer and subject to certain
change is a correction
preparer penalties).
or change limited to
A $500 penalty may be imposed, per I.R.C. §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 based on the taxpayer’s anticipated refund, may,
n
cash a refund check and remit all of the cash to the taxpayer,
n
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,
n
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. Under Treas. Reg. 1.6695-1(f), a tax preparer, however, may
affix the taxpayer’s name to a check for the purpose of depositing the check
into the account in the name of the taxpayer or in joint names of the taxpayer
and one or more persons (excluding the tax return preparer) if authorized by
the taxpayer or the taxpayer’s recognized representative. The IRS may sanction any income tax return preparer that violates this provision.
In addition to the above-specified provisions, the IRS reserves the right to
assert all appropriate preparer and non-preparer penalties against a Provider
as warranted.
47
a transposition error,
misplaced entry,
spelling error or
arithmetic correction.
Notice
,
Paperwork Reduction Act
,
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. It must maintain books or records relating to
a collection of information as long as their contents may become material in
the administration of any internal revenue law. Generally, tax returns and tax
Generally, tax
return information are confidential, as required by 26 U.S.C. §6103.
returns and tax
The collections of information in this publication are in chapters 3, 4 and
return information
5. This information is required to implement IRS e-file and to enable taxpay-
are confidential,
ers to file their individual income tax returns electronically. The IRS uses this
as required by
information to ensure that taxpayers receive accurate and essential informa-
26 U.S.C. §6103.
tion 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
6,023,762 hours.
48
Glossary
,
Acceptance Letter – Correspondence that includes identification numbers
that are issued by the IRS to applicants confirming they may participate in
IRS e-file as Authorized IRS e-file Providers (Providers).
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
An ACK Report
Developers that participate in IRS e-file to assess their software and trans-
identifies the returns
mission capability with the IRS, prior to live processing.
in each transmission
Administrative Review Process – The process by which a denied applicant
that are accepted or
or sanctioned Authorized IRS e-file Provider may appeal the IRS’ denial or
rejected for specific
sanction.
reasons.
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 participate
in IRS e-file.
Automated Clearing House (ACH) – A system that administers electronic
fund 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.
Business Rules (BR) – Error codes included on an Acknowledgement
(ACK) for returns that the IRS rejected. The IRS publishes explanations
prior to the filing season on IRS.gov. Providers can locate these on the
Schemas and Business Rules for Forms 1040/1040EZ/1040A/1040-SS
(PR)/4868/2350/9465/56 Modernized e-File (MeF).
49
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.
Denied Applicant – An applicant that the IRS does not accept to participate
in IRS e-file. An applicant that the IRS denies from 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 Signature – An electronic signature based upon cryptographic
methods of originator authentication, computed by using a set of rules and a
set of parameters such that the identity of the signer and the integrity of the
data can be verified. The digital signature must be consistent with Federal
Information Processing Standards for digital signatures adopted by the
National Institute for Standards and Technology and includes use of the
digital signature algorithm, the RSA digital signature, and the elliptic curve
digital signature algorithm to verify and validate digital signatures.
An applicant
Direct Deposit – An electronic transfer of a refund into a taxpayer’s financial
that the IRS
institution account.
denies from
Direct Filer – Transmits returns directly to IRS. Also, see “Transmit.”
Drop or Dropped – An EFIN that is no longer valid due to inactivity or other
administrative action.
participation
in IRS e-file has
the right to an
administrative
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 provide 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.
Electronic Federal Tax Payment System (EFTPS) – A free service from the
U.S. Treasury through which federal taxes may be paid. The taxpayer can pay
taxes via the Internet, by phone or through a service provider. After authorization, EFTPS electronically transfers payments from the authorized bank
account to the Treasury’s general account.
50
review.
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 Department
of the Treasury transmits Direct Deposit refunds from the government to the
taxpayer’s account at a financial institution.
Electronic Funds Withdrawal (EFW) – A payment method that allows the
taxpayer to authorize the U.S. Treasury to electronically withdraw funds from
their checking or savings account.
Electronic Postmark – The Electronic Postmark is the date and time the
Transmitter first receives the electronic return on its host computer in the
Transmitter’s time zone. The taxpayer adjusts the time to their time zone to
The Federal/State
determine timeliness.
Electronic Record – Any combination of text, graphics, data, audio, pictorial
or other information representation in digital form that is created, modified,
maintained, archived, retrieved or distributed by a computer system.
e-file option allows
taxpayers to
file federal and state
income tax returns
Electronic Return Originator (ERO) – An Authorized IRS e-file Provider that
electronically in a
originates the electronic submission of returns to the IRS.
single transmission
Electronic Signature – A method of signing an electronic message that iden-
to the IRS.
tifies and authenticates a particular person as the source of the electronic
message and indicates such person’s approval of the information contained
in the electronic message.
Electronic Signature Pad – An electronic device with a touch sensitive LCD
screen which allows users to acquire and register a signature or any other
physical signature capture device that captures and converts a signature into
an electronic format.
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 electronic filing 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.
Federal/State e-file – The Federal/State e-file option allows taxpayers to
file federal and state income tax returns electronically in a single transmission
to the IRS.
51
Financial Institution – For the purpose of Direct Deposit of tax refunds, the
IRS defines a financial institution 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.
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.
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 electronic tax return information from an ERO or a taxpayer who files
Only certain
electronically using a personal computer and commercial tax preparation
financial institutions
software, that processes the electronic tax return information and either
forwards the information to a Transmitter or sends the information back to
the ERO or taxpayer.
and certain kinds
of accounts are
eligible to receive
Internet Protocol (IP) Information – The IP address, date, time and time
zone of the origination of a tax return. By capturing this information, the IRS
receives the location of the return’s originator with the individual income tax
electronic return. See Publication 4164 for additional Information.
IRS e-file – The brand name of the electronic filing method established by
the IRS.
IRS Master File – A centralized IRS database containing taxpayers’ personal
return information.
Key Person – An individual of a large firm (other than a sole proprietor) with
multilayered management who “participates substantially” in the firm’s
electronic filing operations, and may be shown as a Principal on the firm’s IRS
e-file Application. A large firm usually has subsidiaries or multiple operating
52
Direct Deposits of
tax refunds.
divisions/branches. “Participate substantially” means participation that
is extensive and substantive, with control over the firm’s electronic filing
operation, and not peripheral, clerical or ministerial.
Levels of Infractions (LOI) – Categories of infractions of IRS e-file rules
based on the seriousness of the infraction with specified sanctions associ-
The IRS usually
ated with each level. Level One is the least serious, Level Two is moderately
conducts pilot
serious and Level Three is the most serious.
programs within a
Memorandum of Agreement (MOA) & Memorandum of Understanding
limited geographic
(MOU) – The implementing document containing the set of rules established
area or within a
by the IRS for participating in IRS pilots/programs.
limited taxpayer
Modernized e-File (MeF) – An electronic filing system that uses an internet
based platform. It is a transaction-based system that allows tax return
originators to transmit returns electronically to the IRS in real-time. MeF
improves the response time required to issue an acknowledgement file to the
transmitter that indicates whether the return was accepted or rejected for
downstream processing.
Monitoring – Activities the IRS performs in order to ensure that Authorized
IRS e-file Providers comply 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 periodic suitability checks. IRS personnel perform
these activities at IRS offices and at the offices of Providers.
Name Control – The first four significant letters of a taxpayer’s last name that
the IRS uses in connection with the taxpayer SSN to identify the taxpayer,
spouse and dependents.
Non-substantive 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.
Pilot Programs – An approach that the IRS uses to improve and simplify IRS
e-file. The IRS usually conducts pilot programs within a limited geographic
area or within a limited taxpayer or practitioner community. The IRS embodies rules for participating in pilot programs in an implementing document
53
or practitioner
community.
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; or (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.
Practitioner PIN Method – An electronic signature option for taxpayers who
use an ERO to e-file. This method requires the taxpayer to use a five-digit
Personal Identification Number (PIN) to use as the signature on the e-file
return. Requires Form 8879 to be completed and signed by the taxpayer and
ERO.
Preparer Tax Identification Number (PTIN) – An identification number issued
by the IRS that paid tax return preparers must use on returns they prepare.
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.
Obtain a PTIN on IRS.gov.
Principals – Generally the Principal for a business or organization includes
sole proprietor, each partner who has a 5 percent or more interest in the
partnership, the President, Vice-President, Secretary, and Treasurer of the
corporation and an individual authorized to act for the entity in legal and/or
A “potentially
abusive return” is
a return (1) that is not
a fraudulent return;
(2) that the taxpayer
is required to file;
or (3) that may
tax matters for an entity that is not a sole proprietorship, partnership, or
contain inaccurate
corporation.
information.
Refund Anticipation Check (RAC) – Financial product where the tax refund
is issued to a limited/special purpose deposit account at a financial institution
that disburses fees associated with tax preparation and/or other services,
and the balance to the taxpayer.
Refund Anticipation Loan (RAL) – Money borrowed by a taxpayer that the
lender bases 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 lender may market a RAL under various commercial or financial
product names.
Refund Cycle – The anticipated date that the IRS would issue a refund either
by Direct Deposit or by mail to a taxpayer. However, neither the IRS nor FMS
guarantees the specific date that Department of the Treasury mails a refund
or deposits it into a taxpayer’s financial institution account.
54
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
A Responsible
contractors and to solicit proposals to perform contracts.
Official is responsible
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
for ensuring that the
Authorized IRS e-file
of contact with the IRS and has authority to sign revised IRS e-file applica-
Provider adheres to
tions. A Responsible Official is responsible for ensuring that the Authorized
the provisions of the
IRS e-file Provider adheres to the provisions of the Revenue Procedure and
Revenue Procedure
the publications and notices governing IRS e-file.
and the publications
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 it issues disbursement of revenue only
to entitled taxpayers.
Routing Transit Number (RTN) – A number assigned by the Federal Reserve
to each financial institution.
RSA – An algorithm developed by Rivest, Shamir and Adleman.
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 4164 and/or (b) transmitting the electronic portion of
returns directly to the IRS. A Software Developer may also sell its software.
Stockpiling – Stockpiling is waiting more than three calendar days to submit
returns to the IRS after the Authorized IRS e-file Provider has all necessary
information for origination of the electronic return or collecting e-file returns
prior to official acceptance for participation in IRS e-file. The IRS does not
55
and notices governing
IRS e-file.
consider collecting tax returns for IRS e-file prior to the startup of IRS e-file
as stockpiling. However, Providers must advise taxpayers that it cannot
transmit the returns to the IRS prior to the startup date.
Stylus Device – A device used on a display screen to input commands or
handwritten text.
Submission ID – A globally unique 20 digit number assigned to electronically
filed tax returns with the following format: (EFIN + ccyyddd + 7-digit alphanumeric sequence number).
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 may include background and
personal tax compliance checks 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.
The suitability
Tax Refund-Related Products – Financial products based on taxpayers
check may include
receiving a tax refund such as Refund Anticipation Loans (RALs), Refund
background and
Anticipation Checks (RACs), etc.
personal tax
Transmitter – An Authorized IRS e-file Provider that transmits the electronic
compliance checks
portion of a return directly to the IRS. An entity that provides a “bump up”
conducted by the
service is also a Transmitter. A bump up service provider increases the trans-
IRS to ensure the
mission rate or line speed of formatted or reformatted information that it is
firm and individuals
sending to the IRS via a public switched telephone network.
are eligible for
Treasury Offset Program (TOP) – Public Law that established the Tax Refund
participation in
Offset Program that permits the government to offset overpayments against
IRS e-file.
delinquent child support obligations as well as debts owed to participating
federal and state agencies. Treasury’s Financial Management System (FMS)
office assumes responsibility and oversight for TOP.
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.
Publication 1345 (Rev. 04-2014) Catalog Number 64382J
Department of the Treasury Internal Revenue Service
www.irs.gov
| File Type | application/pdf |
| File Title | Publication 1345 (Rev. 4-2014) |
| Subject | Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns |
| Author | IRS |
| File Modified | 2014-04-28 |
| File Created | 2014-04-22 |