what to do now … before the big rush
steps to review e-file requirements and processes
The ability to file federal, state and local tax returns electronically is essential. Ensure that the firm’s capabilities to do so are in place prior to the start of the filing season.
Research mandatory e-filing requirements for federal and state tax returns. Preparers filing 11 or more U.S. individual or trust tax returns are required to e-file. Importantly, each state where a tax return is filed has its own e-filing rules, which must be separately researched.
Review the information currently on file with the IRS. Is the firm authorized as an IRS e-file provider? If not, register as an e-file provider with the IRS. If information on file with the IRS has changed, update it or reapply as a new e-file provider.
Train professional and administrative personnel on firm e-filing processes. Submit completed returns electronically only upon receipt of both the signed e-file authorization forms and documentation acknowledging the client’s review and approval of draft returns. Signed Form 8879, IRS e-file Signature Authorization, and state equivalents must be received by the firm before tax returns are filed electronically, and Form 8878, IRS e-file Signature Authorization for Form 4868 or Form 2350, and state equivalents must be received before extensions are filed. Retain documentation acknowledging the client’s approval and the e-file authorization form(s).
When filing electronically, save acknowledgments from the IRS or other tax authorities indicating return acceptance, not only receipt, for at least three years. Every year, claims are filed for returns submitted but not accepted by the IRS for e-filing. Reduce this likelihood by developing a system to identify returns not accepted by the IRS and establish follow-up procedures, including informing the client.
Inform clients that returns will be filed electronically. Client engagement letters and cover letters sent with the tax organizer should include provisions advising that clients will be required to review and approve draft returns and sign appropriate e-file authorization forms prior to tax returns or extensions being filed. If a joint income tax return is filed, both spouses must sign the engagement letter and the forms.