1041 E-file: FAQs on the E-file Mandate

Final regulations implementing the e-file requirements of §6011(e)(3) were issued in January 2011. The FAQs regarding the §6011(e)(3) e-file requirements are based upon recently proposed regulations. These proposed rules are subject to change based upon comments received in response to the recently published notice of proposed rulemaking and the content of final regulations.

How do I become an Authorized E-file Provider?

There are three steps:

Create an IRS e-Services Account.
Submit your application.
Pass a suitability check.

There is no fee, and the process takes up to 45 days. Refer to the Become an Authorized E-file Provider page for more guidance.

E-file Identification Numbers (EFINs) are issued on a firm basis. All tax return preparers in the firm are covered by the one EFIN.

What is the e-file requirement for tax return preparers?

In November 2009, the President signed legislation that requires specified tax return preparers to e-file certain federal income tax returns that they prepare and file for individuals, trusts, and estates.

Who is a 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. If you are a member of a firm, see below.

The new requirement does not apply to individuals who do not meet the definition of “tax return preparers” under the Internal Revenue Code and related regulations, such 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.

What tax returns are covered by the requirement?

The requirement applies to any return of income tax imposed by subtitle A of the Internal Revenue Code on individuals, estates, and trusts, such as Forms 1040, 1040A, 1040EZ, and 1041. Forms 1040NR, 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 e-filed at this time it is anticipated that they will be exempt from the requirement, and will not count towards the 11-return threshold.

What does reasonably expect to file mean?

When computing this number, start with your best estimate of the number of covered returns you reasonably expect to prepare (or if you are a member of a firm, the firm reasonably expects to prepare) in the upcoming calendar year. Subtract 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 themselves file with the IRS. You may also subtract the number of returns that you expect not to be able to e-file for various reasons, e.g., a form not accepted in IRS e-file. The balance is your reasonable filing expectation.

When is an income tax return considered filed by a tax return preparer?

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.

I am a member of a firm. How do the rules apply?

The rules require firms to compute the number of covered returns, in the aggregate, they reasonably expect to file as a firm. If that number is 11 or more, then all members of the firm must e-file the returns they prepare and file. This is true even if a member prepares and files fewer than the threshold on an individual basis.

In a firm, does each preparer need an EFIN?

No. E-file Identification Numbers are issued on a firm basis. All preparers in the firm are covered by one EFIN. This will not change. Note that a sole proprietorship is considered a firm for EFIN purposes.

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 are specified tax return preparers and are required to e-file 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. Second, a specified tax return preparer may request a waiver by submitting Form 8944, Preparer E-file Hardship Waiver Request, if the specified tax return preparer believes complying with the requirement would cause an undue hardship. 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.

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 Electronically, and attaching it to the paper returns.

Does the requirement include payroll tax returns?

No, the requirement does not apply to payroll tax returns.

How will taxpayers learn of this new law and how it applies to preparers?

Many taxpayers may not be aware of the new law and the requirements that apply to preparers. If a client wants to file on paper, preparers should explain the new law to the client. Preparers also are encouraged to explain the benefits of e-file. See below if a preparer’s client chooses to have the return prepared and filed on paper.

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 below for recommended language for this statement. Do not send the statement to the IRS or attach it to the client’s tax return. Instead, attach Form 8948, Preparer Explanation for Not Filing Electronically, to your client’s paper return and check box 1. Include your PTIN on each tax return where requested.

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 s/he may be required to electronically file my [INSERT TAX YEAR] income tax return [INSERT TYPE OF RETURN: Form 1040, Form 1040A, Form 1040EZ, Form 1041] if s/he files it with the IRS on my behalf. I do not want to file my return electronically and choose to file my return on paper forms. My preparer will not file my paper return with the IRS. I will file my paper return with the IRS myself. I was not influenced by [INSERT PREPARER’S NAME] or any member of his/her firm to sign this statement.

Can a specified tax return preparer request a waiver?

Yes, in certain situations. Submit Form 8944, Preparer e-file Hardship Waiver Request, to request a waiver. Waivers will be reviewed and approved in cases where the preparer demonstrates that complying would be an undue hardship. Approved waivers will be valid for one calendar year.

Do not attach the approved waiver letter to clients’ returns. Instead, attach Form 8948, Preparer Explanation for Not Filing Electronically, to your clients’ returns, check box 2 and enter the requested information. Include your PTIN on each tax return where requested. See Notice 2010-85.

Some tax forms cannot be e-filed. What do we do about that? Also what about attachments such as basis statements?

It is anticipated that tax forms that cannot be e-filed will not have to be e-filed pursuant to an administrative exemption. Attachments that cannot be e-filed are also expected not to have to be e-filed.

If our software does not have the forms, the return should generate a severe diagnostic directing the client to paper file. If the client needs to attach additional attachments, use the PDF attachments available under Organizer > E-file > Return > Attachments.

It is expected that these returns will be e-filed if prepared and filed by a specified tax return preparer.

I am already an Authorized IRS e-file Provider. Do I need to take any action?

You may. Since you are already enrolled to e-file, you do not have to do that again. If you do not e-file all of the returns you prepare and file, you must first determine whether you are a specified tax return preparer. If you are a specified tax return preparer, you are required to e-file the covered returns you prepare and file. There are certain exceptions (see above, Does the requirement for 11 or more returns mean that every return must be e-filed?). In those situations, you should attach Form 8948, Preparer Explanation for Not Filing Electronically, to those paper returns.

I am a tax return preparer and a member of a recognized religious group that is conscientiously opposed to e-file. How do I comply with the law?

If you are a specified tax return preparer who is a member of a recognized religious group that is conscientiously opposed to preparing and e-filing a return, an administrative exemption is expected to be available for the returns you prepare. Attach Form 8948, Preparer Explanation for Not Filing Electronically, to your clients’ returns and check box 3. Include your PTIN on each tax return where requested.

I am a specified tax return preparer living and working abroad. I am not eligible for a Social Security number and cannot apply for IRS e-file. How do I comply with the law?

It is anticipated that foreign persons who cannot apply for IRS e-file and who are not members of firms that are eligible to e-file will be exempt from the e-file requirements pursuant to an administrative exemption in 2011. It is anticipated that to qualify for the exemption you must have applied for a PTIN and submitted Form 8946, PTIN Supplemental Application for Foreign Persons Without a Social Security Number.

Attach Form 8948, Preparer Explanation for Not Filing Electronically, to your clients’ returns and check box 6a. Do not attach Form 8946 to the tax return or Form 8948. If you have received your PTIN, include it on each tax return where requested.

IRS expects to accept IRS e-file foreign preparers with PTINs who are not eligible for Social Security numbers.

E-file/1041_ef_mandate_4.htm/TY2020

Last Modified: 08/13/2020

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