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IRS Issues Final Regs and Guidance on Mandatory E-Filing Requirements - Emil Estafanous, CPA : Emil Estafanous, CPA

IRS Issues Final Regs and Guidance on Mandatory E-Filing Requirements

The IRS released final regulations (T.D. 9518) and several pieces of superintendence relating to a requirement that lapse preparers e-file taxation returns, starting this year. The final regulations adopt, with teenager amendments, due regulations (REG-100194-10) that were published final December, and they need specified taxation lapse preparers to e-file if they pretty design to record 100 or some-more income taxation earnings in 2011.

The final regulations explain a construction of “specified taxation lapse preparer,” conclude a tenure “file,” concede taxpayers to opt out of carrying their earnings e-filed if they follow prescribed procedures, yield for undue hardship waivers and executive exemptions, and yield a two-year transition rule. The final regulations are effective on their announcement in a Federal Register.

The imperative e-filing requirement relates to any income taxation lapse for an individual, estate, or trust. However, certain earnings that a IRS can't accept electronically are now free from a requirement. These free forms embody Form 990-T, Exempt Organization Business Income Tax Return; Form 1040-NR, U.S. Nonresident Alien Income Tax Return; Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts; and all nice particular income taxation returns.

The IRS perceived 53 combined comments on a due regulations and done amendments to a final regulations formed on some of a comments.

Specified Tax Return Preparer and Two-Year Transition

For 2011, a regulations conclude a “specified taxation lapse preparer” as a taxation lapse preparer who pretty expects to record 100 or some-more particular income taxation earnings during a year. If a lapse preparer is a member of a firm, afterwards a 100-return extent relates in a total to all a firm’s members. Starting in 2012, a 100-return extent will be reduced to 11 returns.

The final regulations mention that a integrity of either a lapse preparer pretty expects to record adequate earnings to tumble within a e-filing charge is done any calendar year for that year. The integrity is “based on all relevant, objective, and demonstrable contribution and resources before to a time a taxation lapse preparer and a preparer’s organisation initial record an particular income taxation lapse during a calendar year” (Regs. Sec. 301.6011-7(d)(2)).

The regulations yield 5 examples of when a lapse preparer pretty expects to accommodate a return-filing threshold.


Some commentators against a e-filing requirement since they infrequently mail paper earnings to a IRS as a use to their clients. The commentators cited situations such as when clients are aged or incapacitated or roving and it is not unsentimental or available for them to mail their earnings themselves.

Responding to these comments, a IRS has supposing a transition rule, for 2011 only, to concede lapse preparers to mail earnings for clients underneath specific circumstances, that are spelled out in Notice 2011-27.  The lapse preparer contingency obtain a hand-signed and antiquated matter from a taxpayer containing both a taxpayer’s choice to have a lapse filed on paper and a taxpayer’s “unambiguous request” that a lapse preparer mail a lapse for a taxpayer. The notice provides representation denunciation for this statement.

The due regulations tangible acquiescence in paper form by a lapse preparer to embody “any act or acts of assistance over providing filing or smoothness instructions to a taxpayer.” Commentators asked for construction of what acts of assistance would volume to filing by a lapse preparer. In response, a IRS has private a word from a final regulations and simplified in a preliminary that “providing filing or smoothness instructions, an addressed envelope, postage estimates, stamps, or identical acts designed to support a taxpayer in a taxpayer’s efforts to rightly mail” a lapse will not consecrate filing by a lapse preparer, “as prolonged as a taxpayer indeed mails” a paper lapse to a IRS.

Taxpayer Opt Out

Under a due regulations, taxpayers would be means to select to record their possess earnings on paper, though a lapse preparer contingency obtain from any taxpayer who wishes to do this a sealed and antiquated combined matter from a taxpayer saying that a taxpayer chooses to record a lapse in paper format and that a taxpayer, not a lapse preparer, will contention a paper lapse to a IRS. The final regulations adopt this rule.

The IRS perceived several comments suggesting alternatives to a sealed taxpayer statement; however, a IRS did not adopt these suggestions. One idea it did incorporate into a final regulations was that, for married taxpayers who wish to paper record a corner return, one spouse’s signature on a taxpayer choice matter will be sufficient.

The IRS released superintendence on documenting a taxpayer’s choice to paper record in Rev. Proc. 2011-25. The income procession includes representation denunciation to use for a taxpayer statement. The matter should not be trustworthy to a taxpayer’s return, though should be kept by a lapse preparer. An email summary from a taxpayer is not a sufficient matter for these purposes, though a duplicate of a taxpayer’s hand-signed and antiquated matter can be sent as an email attachment.

Hardship Waivers

The final regulations adopt a sustenance permitting a IRS to relinquish a e-filing requirement where a requirement would emanate an undue hardship for a lapse preparer. The IRS supposing superintendence on hardship waivers in Rev. Proc. 2011-25. The hardship waiver manners ask immediately.

A hardship waiver ask contingency be done on Form 8944, Preparer E-file Hardship Waiver Request. The form contingency generally be submitted between Oct 1 of a year preceding a year for that a waiver is requested and Feb 15 of a germane year.

The IRS remarkable in a income procession that it will usually extend hardship waivers usually in singular circumstances. It also remarkable that when technological issues impact a operation of lapse preparers, it will generally yield an executive grant (see below) and not a hardship waiver. The fact that a lapse preparer does not have a mechanism or suitable program will not, station alone, consecrate drift for a hardship waiver.

The IRS will examination hardship waiver requests and send combined notice of their capitulation or denial. Return preparers can send a combined ask for reconsideration if their hardship waiver ask is denied.

Administrative Exemptions

The final regulations also concede a IRS to yield executive exemptions to a e-filing requirement. In Notice 2011-26, a IRS has supposing those exemptions. Specifically, executive exemptions are combined for:

  • Specified taxation lapse preparers who are members of certain eremite groups that are morally against to electronic technology;
  • Certain unfamiliar preparers though Social Security numbers (but such preparers contingency have practical for a preparer taxation marker number);
  • Specified taxation lapse preparers who are now incompetent to e-file since of an IRS e-file sanction;
  • Returns that have been deserted by a IRS e-file complement where a preparer attempted to though could not solve a reject condition or code;
  • Returns prepared regulating program that does not support e-filing of one or some-more forms or schedules that are partial of a return;
  • Returns not e-filed due to short-term, verifiable, and documented technological problems; and
  • Returns a IRS now does not accept electronically (as remarkable above) or earnings with attachments or compulsory support that a IRS can't accept electronically.

These executive exemptions are involuntary and are germane retroactively to Jan 1, 2011.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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