Section 6011(e)(3) of the Internal Revenue Code requires specified tax return preparers to electronically file certain federal income tax returns that they prepare and file for individuals, trusts, or estates after December 31, 2010.
Specified Tax Return Preparer
A specified tax return preparer is a preparer of covered returns (see below) who reasonably expects to file 11 or more covered returns in a calendar year. If you are a member of a firm, see below. The requirement does not apply to individuals who do not meet the definition of “tax return preparer” under the Internal Revenue Code and related regulations, such as an individual who provides tax assistance under a Volunteer Income Tax Assistance (VITA) program, a person who merely prepares a return of the employer (or of an officer or employee of the employer) by whom the person is regularly and continuously employed, or a person who prepares a return as a fiduciary for any person.
The requirement applies to any return of income tax imposed by subtitle A of the Internal Revenue Code on individuals, trusts, or estates, such as Forms 1040, 1040A, 1040EZ, and 1041. Forms 1041QFT and 990T (when the exempt organization is a trust subject to tax on unrelated business taxable income under section 511(b)) also meet the definition of a return of income tax, but because these forms cannot be electronically filed at this time they are exempt from the requirement, and do not count towards the 11-return threshold.
When computing this number, estimate the number of covered returns you reasonably expect to prepare and file (or if you are a member of a firm, the firm reasonably expects to prepare and file) in the calendar year. See FAQ 7 for “When an income tax return is considered filed by a tax return preparer.” Do not include in this estimate the number of returns that you reasonably expect your clients (or the firm reasonably expects its clients) will choose to have completed in paper format and will submit (e.g., mail or otherwise deliver) to the IRS themselves. Also, do not include in this estimate the number of returns that you expect not to be able to electronically file for various reasons, e.g., a form not accepted in IRS e-file. See FAQ 19. This estimate is your reasonable filing expectation.
For purposes of this electronic filling requirement, a return is considered filed by a tax return preparer or specified tax return preparer if the preparer or any member, employee, or agent of the preparer or the preparer’s firm submits the tax return to the IRS on the taxpayer’s behalf, either electronically or in non-electronic (paper) form. For example, the act of submission includes the preparer or a member of the preparer’s firm dropping the return in the mailbox for the taxpayer. Acts such as providing filing or delivery instructions, an addressed envelope, postage estimates, stamps, or similar acts designed to assist the taxpayer in the taxpayer’s efforts to correctly mail or otherwise deliver an individual income tax return to the IRS do not constitute filing by the tax return preparer or specified tax return preparer as long as the taxpayer actually mails or otherwise delivers the paper individual income tax return to the IRS.
In a firm, does each preparer need an EFIN?
No. Electronic Filing Identification Numbers are currently issued on a firm basis. All preparers in the firm are covered by one EFIN. Note that a sole proprietorship is considered a firm for EFIN purposes. In the future, IRS expects to enable individual preparers who are not eligible for social security numbers and live and work abroad to apply for EFINs under certain circumstances.
Does the requirement for 11 or more returns mean that every return must be e-filed?
Tax return preparers who reasonably expect to file, or whose firm reasonably expects to file, in the aggregate, 11 or more covered returns (see FAQ 5) in a calendar year are specified tax return preparers and are required to submit electronically any return that the preparer files with the IRS. However, some returns may be filed on paper.
First, clients may choose to file on paper and preparers can honor that choice. See FAQs 16 and 17. Second, a specified tax return preparer may request a waiver by submitting Form 8944, Preparer e-file Hardship Waiver RequestPDF, if the specified tax return preparer believes complying with the requirement would cause an undue hardship. See FAQ 18. And third, some returns are impossible to e-file for various reasons and are therefore exempt from the e-file requirement, or the preparer belongs to a certain class of specified tax return preparer that qualifies for an administrative exemption. See FAQs 19-23.
Specified tax return preparers should identify the paper returns they prepare for any of the above reasons by completing Form 8948, Preparer Explanation for Not Filing ElectronicallyPDF, and attaching it to the paper returns. However, preparers do not have to complete Form 8948 and attach it to any paper return IRS does not accept electronically. See FAQ 19 for a list of returns and filing situations where IRS does not accept returns electronically.
Can my clients choose not to e-file?
Yes. Even if you are a specified tax return preparer, your clients may independently choose to file on paper. Preparers should document each client’s choice to file in paper format and keep a signed copy of the statement on file. See FAQ 17 below for the statement. Do not send the statement to the IRS or attach it to the client’s tax return. Instead, specified tax return preparers should attach Form 8948, Preparer Explanation for Not Filing ElectronicallyPDF, to your client’s paper return and check box 1. Include your PTIN on each tax return where requested. If your clients are filing a joint return, only one spouse’s signature is necessary on the choice statement.
What is the recommended language for documenting a taxpayer’s choice to file on paper?
My tax return preparer [INSERT PREPARER’S NAME] has informed me that [INSERT s/he] may be required to electronically file my [INSERT TAX YEAR] individual income tax return [INSERT TYPE OF RETURN: Form 1040, Form 1040-A, Form 1040-EZ, Form 1041, Form 990-T] if [INSERT s/he] files it with the IRS on my behalf (e.g., submits it by mail to the IRS). I understand that electronic filing may provide a number of benefits to taxpayers, including an acknowledgment that the IRS received the returns, a reduced chance of errors in processing the returns, and faster refunds. I do not want to have my return electronically filed, and I choose to file my return on paper forms. I will mail or otherwise submit my paper return to the IRS myself. My preparer will not file or otherwise mail or submit my paper return to the IRS.
Can a specified tax return preparer request a waiver from the e-file requirement?
Yes, in certain situations. Submit Form 8944, Preparer e-file Hardship Waiver RequestPDF, to request a waiver. Waivers are reviewed and approved in cases where the preparer demonstrates that complying would be an undue hardship. Approved waivers are valid for one calendar year. Form 8944 generally must be submitted to the IRS no later than February 15 of the year for which a waiver is being requested.
Do not attach the approved waiver letter to clients’ returns. Instead, attach Form 8948, Preparer Explanation for Not Filing ElectronicallyPDF, to your clients’ returns, check box 2 and enter the requested information. Include your PTIN on each tax return where requested. See Revenue Procedure 2011-25.
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