Small Business Taxes & ManagementTM--Copyright 2010, A/N Group, Inc.
The IRS has detailed (IR-2010-116) how, starting Jan. 1, 2011, paid tax return preparers can comply with a new law that requires paid tax return preparers who meet the definition of ďspecified tax return preparerĒ under the new law to electronically file (e-file) federal income tax returns that they prepare and file for individuals, trusts and estates.
The e-file requirement will be phased in over two years.
Starting Jan. 1, 2011, paid preparers who prepare income tax returns for individuals, trusts and estates, such as Forms 1040, 1040A, 1040EZ, and Forms 1041, and who reasonably expect to file 100 or more of these income tax returns in 2011 are specified tax return preparers required to file these returns electronically.
Tax return preparers who are members of a firm are specified tax return preparers and must electronically file the income tax returns they prepare and file if the firmís preparers, in the aggregate, expect to file 100 or more of these income tax returns in 2011.
Starting Jan. 1, 2012, the 100-return threshold will be reduced to 11 or more income tax returns that the preparer, or the preparerís firm in the aggregate, expect to file in 2012 for individuals, trusts and estates.
To comply with the new law, a tax return preparer who is subject to the electronic filing requirement and does not already provide e-file for clients must become an authorized IRS e-file provider, which means he, she, or the firm, if the preparer is a member of a firm, must obtain an electronic filing identification number (EFIN). It takes up to 45 days to obtain an EFIN so return preparers who have not started the process should start immediately.
Proposed regulations (REG-100194-10) detail the two-year phase-in plan and provide exclusions from the e-file requirement for undue hardship waivers approved by the IRS and for certain administrative exemptions. In addition, under the proposed regulations, the e-file requirement does not apply to an individual income tax return when a tax return preparerís taxpayer-client chooses to have the return completed in paper format and the taxpayer-client, and not the preparer, will file the paper return with the IRS. A notice issued with the proposed regulations contains a proposed revenue procedure on undue hardship waivers and taxpayer choice statements to file in paper format.
The proposed regulations indicated that a waiver may generally be granted to a specified tax return preparer for an undue hardship that can be identified in advance, before the specified tax return preparer would otherwise be required to file individual income tax returns electronically. Because this electronic filing requirement is statutorily imposed, the IRS will ordinarily grant undue hardship waivers only in rare cases. An undue hardship waiver may be granted to a specified tax return preparer for a series or class of individual income tax returns or for a specified period of time. A determination of undue hardship will be based upon all facts and circumstances. A specified tax return preparer shall request an undue hardship waiver in the manner prescribed by the IRS in forms, instructions, or other appropriate guidance. A Notice containing a proposed revenue procedure outlining the requirements and format for undue hardship waiver requests is being published concurrently with these proposed regulations.
Tax professionals and other interested parties have until Jan. 3, 2011 to submit comments regarding the proposed regulations and the notice of proposed revenue procedure. Final regulations will be published in early 2011, but will be retroactively effective as of Jan. 1, 2011, as described in the proposed regulations.
Copyright 2010 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 12/02/10