What Is an Entity Code Rejection and How to Fix It?
Resolve entity code rejections in e-filings. Understand common causes and find steps to correct business classification errors for successful submission.
An entity code rejection is an error message received during the electronic filing of financial or tax documents. It indicates a discrepancy in the business classification provided, meaning the e-filed information does not precisely match the records held by the relevant tax or regulatory agency.
Understanding Entity Code Rejections
An “entity code” refers to the classification of a business for tax and regulatory purposes. These classifications categorize businesses based on their legal structure, such as a sole proprietorship, partnership, S-corporation, C-corporation, or non-profit organization. Each entity type has specific tax implications and reporting requirements.
An entity code rejection occurs when the classification code submitted in an electronic filing does not align with the entity identification number (e.g., Employer Identification Number or EIN) on file with the agency. This mismatch prevents the successful processing of the electronic submission. The error message signals that the agency’s system cannot verify the business’s identity as presented. This ensures data accuracy before a submission is formally accepted.
Common Causes of Rejection
Several factors can lead to an entity code rejection. A frequent reason is the selection of an incorrect entity type, such as filing as an S-corporation when the business is registered as a C-corporation. This misclassification prevents the agency from matching the submitted return to its records.
Another common cause involves a mismatch in the Employer Identification Number (EIN) or the legal business name. Even a minor typographical error in the EIN or a slight difference in the business name can trigger a rejection, as agency systems require an exact match. This includes instances where the name control, a four-character sequence derived from the business name, does not align with IRS records.
Recent changes in a business’s legal structure can also cause rejections if the tax agency’s records have not been updated. For example, if a sole proprietorship converted to an LLC, but the filing reflects the old structure, it will likely be rejected. Newly formed entities may also experience a temporary mismatch if an EIN has been issued but not yet fully processed and linked to the correct entity type.
Locating Your Correct Entity Details
To resolve an entity code rejection, accurately identify your business’s official entity type, EIN, and legal name. Official registration documents, such as articles of incorporation, articles of organization, or partnership agreements, serve as a primary source for this information, detailing the legal structure established when the business was formed.
For federal tax purposes, the IRS Confirmation Letter (CP 575) is a definitive source. This letter, received after an EIN is assigned, confirms the nine-digit EIN, the official business name, and often the initial entity classification. If the original CP 575 letter is misplaced, an EIN Verification Letter (147-C) can be requested from the IRS as a replacement.
Reviewing previously accepted tax filings can also provide correct entity details. For state-level filings, consult the relevant state Secretary of State or business registration agency, as state classifications may require separate verification. If documented sources are exhausted, contacting the IRS Business & Specialty Tax Line directly can help confirm the information on file.
Steps for Correcting and Resubmitting
Once accurate entity details are confirmed, correct the rejected filing within the e-filing system. Review the specific rejection notice, as it often contains a code or message indicating the precise field that needs attention. This helps pinpoint whether the error lies with the entity code, EIN, or business name.
Access your tax software or online filing platform and navigate to the section where the incorrect entity code, EIN, or business name was entered. Update these fields with the verified information from official documents or agency records. Review all related fields to ensure consistency before resubmission.
Initiate the electronic resubmission through your software or platform. The system will guide you, and you should receive a new confirmation of acceptance if corrections were successful. If repeated e-file attempts result in rejections, and the issue cannot be resolved electronically, paper filing may become necessary. Taxpayers have a limited window to resubmit electronically after a rejection notice. If paper filing is required, include a copy of the rejection notification and an explanation for the delay.