IRS Publication 3119: E-File Provider Requirements

IRS Publication 3112 is a guide for participants in the IRS e-file program. It details the requirements for using the Modernized e-File (MeF) system to submit tax returns electronically. The publication is for prospective and current Authorized IRS e-file Providers, covering the application process, provider responsibilities, and technical standards. It establishes the rules and procedures that ensure the integrity of the electronic tax administration system.

Becoming an Authorized IRS e-file Provider

The journey to becoming an Authorized IRS e-file Provider begins with a detailed application process. Prospective providers must gather specific information, including the business’s legal name and address, and the Social Security Number, date of birth, and personal address for each principal and responsible official. This information is used for creating an IRS e-Services account, a prerequisite for the main e-file application.

Once the e-Services account is active, the firm can proceed with the online application to participate in the IRS e-file Program. This application requires applicants to select their provider type, such as an Electronic Return Originator (ERO), and provide details about professional credentials, like being a Certified Public Accountant or Enrolled Agent. Individuals without these credentials may be required to submit fingerprints for a background check.

After submission, the IRS conducts a suitability check that can take up to 45 days. The IRS performs a tax compliance check to ensure all principals and the business are current on their tax obligations. A criminal background check and a credit history check are also conducted to assess the integrity of the applicants. Upon successful review, the IRS issues an acceptance letter with the firm’s unique Electronic Filing Identification Number (EFIN), authorizing them to transmit returns.

Core Responsibilities for Providers

Upon receiving an EFIN, a provider assumes ongoing responsibilities for protecting taxpayer information. A primary duty involves implementing security and privacy measures to safeguard taxpayer data against unauthorized access. This includes securing physical locations, protecting computer systems, and ensuring that any transmission or storage of sensitive information is encrypted. Providers must have a written data security plan and are accountable for any breaches.

Record-keeping is another obligation. Providers must retain documents for three years from the return’s due date or the date it was filed, whichever is later. These records include a copy of the electronically filed return, the taxpayer’s signed consent to e-file (Form 8879, IRS e-file Signature Authorization), and other documentation used to prepare the return.

The IRS imposes strict advertising standards to prevent misleading claims. Providers cannot use the official IRS logo in their marketing or imply any special endorsement from the agency. Advertisements must be truthful and cannot misrepresent refund speeds or qualifications. For instance, providers may identify as an “Authorized IRS e-file Provider” but are prohibited from claiming to be part of the IRS.

Providers have a professional duty of due diligence. This requires them to make reasonable inquiries to ensure the information provided by the taxpayer appears correct and consistent. While not required to audit their clients, providers must not ignore questionable information and should ask for clarification when details seem inaccurate or incomplete.

Modernized e-File (MeF) System Operations

Participation in the e-file program requires interaction with the Modernized e-File (MeF) system. This platform processes returns using XML, which allows for more detailed data submission than older systems. A component of MeF is its set of business rules, which are automated checks the system performs on every submitted return. These rules identify common errors, like mathematical mistakes or missing information, before the return is accepted, reducing delays for the taxpayer.

To ensure integration with the MeF platform, software developers and transmitters must undergo testing using the Assurance Testing System (ATS). ATS is a testing environment that simulates the live MeF system, allowing providers to send test transmissions and verify their software correctly formats the XML data. Successful completion of ATS testing is mandatory before a software package can be used to transmit live tax returns.

Once a return is transmitted to the MeF system, the provider receives acknowledgements, or “Acks,” confirming the submission’s status. An initial Ack confirms receipt, while a subsequent one indicates if the return was accepted or rejected based on MeF business rules. If a return is rejected, the acknowledgement includes error codes identifying the problem, enabling the provider to correct and re-submit it.

IRS Monitoring and Sanctions

The IRS monitors Authorized e-file Providers to ensure ongoing compliance with program requirements. This oversight is conducted through automated system checks, analysis of filed returns for patterns of errors, and direct compliance visits. The IRS tracks rejection rates, investigates taxpayer complaints, and reviews provider advertising to identify deviations from program standards.

When the IRS identifies an infraction, the response varies based on severity. Minor issues, such as an elevated rejection rate from correctable software errors, may result in a written warning or a request for a corrective action plan. More serious violations, like failing to secure taxpayer data or knowingly submitting false information, can lead to sanctions, including suspension from the e-file program.

For severe or repeated offenses, the IRS can expel a provider from the e-file program permanently by revoking their EFIN. This action is reserved for cases involving fraud or significant harm to taxpayers. A provider facing a sanction has the right to appeal the decision. The process involves submitting a written appeal to the IRS office that issued the sanction, presenting evidence as to why the penalty should be reconsidered.