Monday, November 21, 2011

Tax Professionals Urged to Prepare for New e-File Rules

The IRS has advised tax professionals and tax firms to start the process to obtain Electronic Filing Identification Numbers (EFINs), so they can meet new e-file requirements beginning in January 2012, if they are required to, but do not already have, EFINs (IRS News Release IR-2011-100). The requirement applies to any paid preparer or firm that reasonably anticipates preparing and filing 11 or more Form 1040 series returns, Form 1041 returns, or a combination of Form 1040 series returns and Form 1041 returns.

To become Authorized IRS e-file Providers, preparers must: (1) create an e-Services account; (2) submit an EFIN application; and (3) pass a suitability check. The approval process can take 45 days or more. For a firm or an individual, only one EFIN is needed. The 2012 requirement marks the second and final phase of implementing a law that was intended to boost the electronic filing rate of income tax returns for individuals, trusts and estates. In 2011, the e-file mandate pertained to any paid preparer or firm that anticipated preparing and filing 100 or more returns.

Preparers can review the process on the IRS's website at "Become an Authorized e-file Provider" or find additional guidance at the "Frequently Asked Questions" section. A one-year waiver, made by submitting Form 8944, Preparer e-file Hardship Waiver Request, may be requested if the e-file requirement will cause undue hardship. Form 8948, Preparer Explanation for Not Filing Electronically, should be included if a client wants to file a paper return.

Form 8948 should be obtained and kept with the preparer's records. It does not have to be submitted with returns that are not currently accepted electronically by the IRS or the IRS has instructed taxpayers not to file them electronically. These returns are exempt from the federal e-file requirement.

Reference: PTE §41,805

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