Effective January 1, 2012, paid tax return preparers must electronically file federal income tax returns if more than ten individual or trust returns were filed.
The rules require members of firms to compute the number of returns in the aggregate that they reasonably expect to file as a firm. If that number was 11 or more in a calendar year (starting in 2012), then all members of the firm must e-file the returns they prepare and file, regardless if one member prepares and files fewer than the threshold on an individual basis. Only authorized e-file providers may use IRS e-file. The authorization process will normally take about 45 days. If a preparer is required to file electronically, failure to do so is characterized as “disreputable conduct” under Circular 230 §10.51(16).
A preparer must be an authorized e-file provider to participate in the IRS e-file. An Authorized IRS e-file Provider (Provider) is a business or organization authorized by the IRS to participate in IRS e-file. An Authorized IRS e-file Provider who submits returns to the IRS via the services of a Transmitter is known as an Indirect Filer. The business may be any group with whom it is possible to conduct business, such as a sole proprietorship, partnership, or corporation. It can also be almost any other type of entity.
Three steps for a preparer to becoming an authorized e-file provider:
First, create an IRS e-services account via the IRS website;
Second, submit an application to the IRS after the preparer is approved for the e-service.
Once approved, the tax preparer or the entity then will be assigned an Electronic Filing Identification Number (EFIN) and will receive credentials (Documentation issued by the IRS which indicates qualification of an Authorized IRS e-file Provider to participate in the IRS e-file Program). The documentation consists of identification numbers and acceptance letters. The authorization process generally takes 45 business days.
However, clients may independently choose to file a paper return if the return is submitted to the IRS by the taxpayer. In this situation, preparers should obtain and keep a signed and dated statement from the client indicating the client’s desire and intent to file a paper return.