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…for Paid Preparers. Mandatory e-file and mandatory registration are now in full force:

• Mandatory e-file. If you expect to prepare more than 10 returns in 2012, you may be required to e-file them all. We explain the final regulations here. If you must e-file, be sure to order your e-file transmission software by October 31 for a 15% discount.

• Mandatory registration. You must register annually because your registration and accompanying PTIN are good for only one calendar year. Most of you can apply or renew quickly on-line, but the IRS doesn't start accepting applications for 2012 until mid-October.

Not a paid preparer? You must act by Sept. 30 to get a discount on your Tax Preparer software.


by HowardSoft®

Professional software at personal prices.

Summer/Fall 2011


Mandatory e-file 101

The Worker, Homeownership, and Business Assistance Act of 2009 mandated that tax preparers who file more than 10 returns a year must e-file them all. However, the IRS has been struggling since then with the phase-in of the new law under temporary regulations. Now that final regulations have been released, we can clarify a number of issues that have confused preparers. Among the important points:

  • 10-return threshold applies to the entire firm - not just individual preparers. If you prepare returns for a firm that expects to file more than 10 returns, you are subject to the requirement even if you personally file 10 or less. And returns you file independently from the firm count toward the total as well.
  • 10-return threshold is based on expectations - not last year's experience alone. There are no specific rules on how to define expectations, but you must be prepared to justify your expectations to the IRS.
  • Only returns that preparer files count - not all returns you expect to prepare. And "file" has a very narrow meaning in the eyes of the IRS. Only returns that you deliver to the IRS (by mail, courier, or e-file) count as returns "filed" by you. In other words, you will not be required to e-file all returns as long as you do not expect to deliver more than 10 returns to the IRS for clients. You can even provide mailing instructions, pre-addressed envelopes, and stamps ... as long as your client is the one who mails the return.
  • Only returns that IRS allows to be e-filed count. Each year, the IRS does not allow certain credits, forms, or documentation to be e-filed, so returns that require them cannot be e-filed. Those returns don't count toward the 10-return limit.
  • Hardship waivers. You can request a hardship waiver through IRS Form 8944, but you must justify your claim. Hardships caused by bankruptcy or a federally-declared disaster are relatively easy to prove. But economic hardship based on the cost of hardware or software upgrades to e-file must be backed up by two written cost estimates, and the IRS has provided no guidance on how much economic sacrifice qualifies you for a waiver.
15% OFF

e-file discounts
Oct. 31!

Note that you are not required to file anything with the IRS to justify a claim that you (or your firm) expect to file no more than 10 liable returns in 2012. However, you must be prepared to justify your claim if asked, so you should not take the requirement lightly.

Even if you exceed the 10-return limit, some of your returns will still be exempt from e-file. If you expect to exceed the 10-return limit, you are theoretically required to e-file all returns for the tax season. However, in practice, the IRS will allow certain returns to be filed on paper:

  • Client chooses paper filing. Any client can choose paper filing by signing a statement to that effect, including confirmation that he or she will deliver the return to the IRS, not the preparer. This statement is not sent to the IRS, but kept in the preparer's files. However, IRS Form 8948 must be attached to the paper return to explain the exclusion.
  • E-filed return was rejected by the IRS. If you cannot resolve the problem that causes rejection of the return, you must attach IRS Form 8948 to the paper return indicating this and the number of attempts made.
  • Software does not support needed form. If your version of Tax Preparer does not support the e-filing of a form required for the return, you must attach IRS Form 8948 to the paper return to identify the form.

New to e-file?

Getting ready for e-file. E-filing is easy with Tax Preparer, but it can take some time to get IRS approval to participate in e-file and to set up your computer for e-file. We therefore recommend that you start the process now ... and get a 15% discount while you're at it:

Step 1: Apply to the IRS. Participation in e-file is not automatic. You must apply to the IRS and wait for their approval after passing their background checks. Once approved, the IRS will issue you an EFIN (e-file identification number). The application can be made with IRS Form 8633, which is available for download in pdf format from a link on our website at\efilepro.htm. When completing the form, be sure to answer Yes to line 2a and No to all other parts of line 2, which do not apply to users of Tax Preparer. Also note that you must include a fingerprint card (available at 866-255-0654) with your application unless you are an attorney, CPA, or enrolled agent. And be sure to send the application to the IRS Andover facility shown at the end of the IRS instructions for Form 8633.

Step 2: Purchase e-file transmission software. You must purchase one of our e-file transmission packages in order to send the clients' returns to the IRS electronically. Order by October 31 and you'll get a 15% discount.

Step 3: Set up your e-file system. We'll help you get registered, including payment arrangements for per-return fees. And we'll help you install your transmission software once it's available for the next tax season. Once installed, you can test your system with test returns. (You can prepare returns for e-file before installing the transmission software to get a head start on the learning curve.)

How e-file works with Tax Preparer. Once you're set up for e-file, you can go through all the steps for e-filing a return:

  • Prepare return. You can prepare the return the way you normally would, but e-file requires special care. For example, you must complete all entries on worksheets (such as W-2 and 1099-R), round all entries to the nearest dollar, and remove all unnecessary worksheets, forms, and itemized lists.
  • Prepare e-file form. Once the return is complete, you must create and complete our special e-file form (the last form on our Forms Menu). You must supply, at the minimum, your IRS-issued EFIN and PIN signatures for you and your clients.
  • Generate e-file output. You must now create a disk file to send to the IRS. It's as easy as printing, and is performed from a choice on our Print Menu.
  • Transmit return to 3rd-party transmitter. Using the e-file transmission software you purchase from us, you must transmit the disk file you created in the preceding step to a transmitter who will forward it to the IRS and give you feedback from the IRS.

If the IRS approves the return, you're done (unless you must mail certain approved documentation to the IRS). Otherwise, you'll have to revise the return to correct any problems, with personal help from HowardSoft always available.

For all of these cases (and a few other, less common, cases), you must attach a completed Form 8948 to the return to explain the exemption. (Form 8948 is not required for returns that the IRS will not accept for e-file under any circumstances, such as returns that contain a form that the IRS does not support for e-file.)

Mandatory registration 101

Preparers are now required to annually register with the IRS before they can prepare returns for pay. The requirement has confused some preparers because registration is linked with PTINs, which were introduced well before mandatory registration applied. The IRS introduced the PTIN (Preparer Tax ID Number) years ago so that paid preparers could use it instead of their confidential SSN when signing their clients' returns. It was considered a lifetime PTIN at the time, but now it expires annually. Your PTIN is now your proof of annual registration. In summary:

  • You must register with the IRS - You can no longer practice as a paid preparer without registering with the IRS first.
  • You must reregister annually - You can renew your registration from mid-October through end of the year before the tax filing season starts.
  • There are no exceptions for CPAs, attorneys, or en-rolled agents - Everyone must register, even preparers who do not sign returns but are just employed and supervised by a CPA, attorney, or enrolled agent.
  • You must provide detailed confidential information - Registration requires you to explain personal tax compliance issues and the details of any felony convictions. The IRS may reject your application based on them.
  • A $64.95 annual fee applies - There are no hardship exemptions and no reduced fee for renewals (contrary to prior IRS announcements).
  • A PTIN is issued each year you register and pay the fee - When you renew, you may or may not be issued the same PTIN as before. In fact, the renewal process doesn't even ask for your old PTIN!
  • Background checks, competency testing and continuing education courses - The IRS isn't set up for them yet, but in the future there will be background checks, competency testing, and continuing education requirements. Active CPAs, attorneys, and enrolled agents will be exempt because they are already subject to similar requirements to obtain and keep their licenses.

The application process. You can register by sending a completed Form W-12 to the IRS. However, it can take 4 to 6 weeks to register and get your PTIN this way. Instead, we recommend that you apply on-line, which will generally get you registered and issued a PTIN within 15 minutes. (TIP: Applications for the next filing season are not open until mid-October.)

  • Create an on-line account - A PTIN account is separate from any other account you may have with the IRS. Just supply your name and e-mail address, choose a user ID and password, and you're in.
  • Complete on-line application - You must fully identify yourself and your business, and supply minimal information from your last personal tax return. You'll also have to identify any tax-related professional licensing you have (such as attorney, CPA, or enrolled agent licensing).
  • Pay the $64.95 fee - You can pay on-line by credit card or direct debit. The same fee applies to renewals.
  • Receive your PTIN - For most applicants the PTIN will appear on-screen after receiving confirmation from your credit card issuer or bank.

More about background checks, competency testing, and continuing education. None of these requirements have yet been fully defined by the IRS, but they will be slowly phased in starting in 2012. Background checks are expected to include fingerpinting, as they do for e-file applications, but the IRS has not yet provided details. Competency tests are expected to be available in January, 2012, covering the basic preparation of Form 1040 returns for typical families, including self-employment and retirement income, popular credits and deductions, and the alternative minimum tax. However, they needn't be passed until the end of 2013. And the continuing education requirements only apply after you have passed the competency test.

More information on ordering

Not sure what to order? See our On-line Comparison Chart at for details on what's included at each level. And if you want to start your returns before the IRS opens the tax season, order the Pre-Release for early filing and instant on-line updating once the regular release is completed.