Becoming an Electronic Return Originator (ERO) with the IRS is a significant step for tax professionals looking to streamline their services and offer electronic filing to their clients. It's a role that comes with important responsibilities, but also offers substantial benefits in terms of efficiency and client satisfaction. This comprehensive guide will walk you through every step of the journey.
Ready to Elevate Your Tax Practice? Become an IRS Electronic Return Originator!
Are you a tax professional seeking to enhance your services, improve efficiency, and provide your clients with the convenience of electronic tax filing? Becoming an Electronic Return Originator (ERO) with the Internal Revenue Service (IRS) is the key to unlocking these opportunities. This role allows you to directly transmit tax returns to the IRS, offering a faster, more accurate, and generally preferred method of filing for taxpayers.
The process involves careful attention to detail, adherence to IRS guidelines, and a commitment to maintaining the highest standards of security and ethics. But don't worry, we'll break it down for you, step by step.
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| How To Become An Ero With The Irs |
Step 1: Understand the Role of an ERO
So, what exactly is an ERO? Before you embark on this journey, it's crucial to grasp the fundamental responsibilities and what the IRS expects from an Electronic Return Originator.
An ERO is an authorized IRS e-file provider who is responsible for the electronic submission of income tax returns to the IRS. This means you'll be the conduit through which your clients' tax returns are securely transmitted.
Key responsibilities of an ERO include:
- Accurate Tax Return Preparation: While you might not always be the preparer, the ERO ensures that all information on the return is accurately reflected, especially on Form 8879, which authorizes the e-file.
- Obtaining Proper Authorization: You are responsible for obtaining the taxpayer's electronic signature, typically through a self-selected Personal Identification Number (PIN), on Form 8879.
- Identity Verification: Before submission, you must verify the taxpayer's identity to prevent fraud, cross-referencing names, Social Security Numbers, and other personal details with their official identification.
- Secure Transmission: The ERO is tasked with the secure and accurate electronic submission of the tax return to the IRS.
- Record Keeping: Maintaining precise records of signed Form 8879s and other relevant documentation for a specified period (typically three years) is paramount.
- Client Communication: Keeping clients informed about their return's status, including transmission to the IRS and acknowledgment of receipt, is part of your professional duty.
Step 2: Meet the IRS Eligibility Requirements
Before you even think about submitting an application, you need to ensure you meet the IRS's stringent eligibility criteria. These requirements are in place to safeguard the integrity of the e-file system.
Tip: Context builds as you keep reading.
Sub-heading: Essential Qualifications
To be eligible to become an ERO, you must generally:
- Have a Preparer Tax Identification Number (PTIN): If you prepare or assist in preparing federal tax returns for compensation, you are required to have a PTIN. This is your unique identification number with the IRS. If you don't have one, apply for it through the IRS website.
- Be in Good Standing with the IRS: This includes being current with your own tax obligations. Any outstanding tax liabilities or unresolved issues with the IRS can hinder your application.
- Pass a Suitability Check: This is a comprehensive background check conducted by the IRS. It typically involves:
- A credit check: The IRS will review your credit history.
- A tax compliance check: They'll verify your compliance with federal tax laws, including filing and payment history.
- A criminal background check: This involves a review of your criminal history.
- A check for prior non-compliance with IRS e-file requirements: If you've had issues with e-filing in the past, they will be considered.
Sub-heading: Professional Credentials (Recommended, Not Always Required)
While not always a strict requirement, having certain professional credentials can certainly strengthen your application and demonstrate your commitment to the tax profession. These include:
- Certified Public Accountant (CPA): Licensed by individual states, CPAs have a broad understanding of accounting and tax laws.
- Enrolled Agent (EA): Enrolled agents are tax professionals who have unlimited practice rights to represent taxpayers before the IRS. This is the highest credential the IRS awards.
- Attorney: Attorneys licensed to practice law in any state are also recognized as tax professionals.
If you hold any of these credentials, you'll need to provide proof during the application process. If you do not have a professional credential, you may be required to undergo fingerprinting.
Step 3: Access and Complete the IRS e-file Application
This is where the actual application process begins. The IRS utilizes an online system for e-file provider applications.
Sub-heading: Creating an IRS e-services Account
- Visit the IRS e-services website: Navigate to the "e-file for Tax Professionals" section on IRS.gov.
- Create an Account: If you don't already have one, you'll need to create an IRS e-services account. This account requires you to provide personal identifying information and security details. Make sure your name is associated with a U.S.-based mobile phone for instant access, or opt for a mailed activation code.
- Principal and Responsible Officials: If your firm has multiple individuals involved, ensure that all "Principal" and "Responsible Official" parties in your organization also register for e-services accounts.
Sub-heading: Filling Out the ERO Application
Once you have your e-services account set up and can sign in, you can access the e-file application.
- Select "Electronic Return Originator (ERO)": During the application process, you'll be prompted to choose your e-file provider option. Select "Electronic Return Originator (ERO)" as this is the designation for those who will e-file for clients.
- Provide Firm and Personal Information: You will need to supply detailed identification information for your firm. For each Principal and Responsible Official in your organization, you'll need to enter their personal information.
- Professional Status Information: If any Principal or Responsible Official is a certified or licensed professional (e.g., attorney, CPA, enrolled agent), they must enter their current professional status information.
- Save Your Progress: The online application system allows you to save your progress and return to it at your convenience. This is a comprehensive application, so take your time and ensure accuracy.
Step 4: Undergo Fingerprinting (If Required)
If you are a Principal or Responsible Official who is not a certified or licensed professional (like an attorney, CPA, or enrolled agent), you will likely need to be fingerprinted.
Tip: Watch for summary phrases — they give the gist.
Sub-heading: Scheduling Your Fingerprinting Appointment
- Access the Scheduling Link: After you submit your e-file application, you can schedule your fingerprinting appointment by accessing the e-file application summary page. There will be a scheduling link in the "Terms of Agreement Signature(s) & Personal Information" section.
- Unique ID and Program Code: This link will be embedded with a unique ID and program code, and each Principal and Responsible Official must schedule their own appointment.
- Livescan Fingerprinting: The IRS uses Livescan fingerprinting, which captures fingerprints electronically. The online scheduling tool will provide a list of Livescan locations within a 120-mile radius.
- Appointment Reminders: Once scheduled, the authorized vendor will send an appointment reminder outlining the required forms of identification to bring to your appointment.
Step 5: Pass the IRS Suitability Check
After you've submitted your application and any required fingerprinting, the IRS will conduct its suitability check. This is a critical phase, and patience is key, as it can take up to 45 days for the IRS to approve your application.
Sub-heading: The Components of the Suitability Check
As mentioned earlier, the suitability check includes:
- Credit Check: To assess financial responsibility.
- Tax Compliance Check: To verify your adherence to federal tax laws.
- Criminal Background Check: To review your criminal history.
- Prior E-file Compliance Check: To evaluate any past issues with IRS e-file requirements.
It is essential to be truthful and ensure all information provided is accurate to avoid delays or rejection.
Step 6: Receive Your Electronic Filing Identification Number (EFIN)
If your application is approved, the IRS will send you an official acceptance letter. This letter will contain your Electronic Filing Identification Number (EFIN).
Sub-heading: Your Gateway to Electronic Filing
The EFIN is your unique identifier as an authorized e-file provider. You cannot transmit tax returns electronically to the IRS without a valid EFIN.
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- Protect Your EFIN: Your EFIN is a sensitive piece of information. Treat it with the same care you would your Social Security Number. Do not share it with unauthorized individuals or accept payment for its use.
- Maintain Security: You are responsible for protecting your EFIN and passwords from unauthorized use.
Step 7: Select and Implement Approved Tax Software
With your EFIN in hand, you'll need suitable tax preparation software that is approved by the IRS for electronic filing.
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Sub-heading: Choosing the Right Software
- IRS-Approved Vendors: Ensure the software you choose is from an IRS-approved vendor. Most reputable tax software providers will clearly state their IRS compliance.
- Features and Functionality: Consider the features you need, such as:
- Ability to prepare various tax forms (individual, business, etc.)
- Secure electronic signature capabilities (e-signatures for Form 8879)
- Client management tools
- Integration with other accounting software if applicable
- Robust data security measures
Many vendors offer excellent solutions for EROs, simplifying the compliance process for electronic signatures on Form 8879.
Step 8: Adhere to Ongoing Responsibilities and Ethical Guidelines
Becoming an ERO isn't a one-time achievement; it's an ongoing commitment to compliance and ethical conduct.
Sub-heading: Key Ongoing Responsibilities
- Safeguarding Taxpayer Data: This is paramount. EROs must implement robust security measures to protect sensitive taxpayer information (Personally Identifiable Information - PII) from identity theft and unauthorized access. This includes securing physical documents, electronic data, and equipment. Refer to IRS Publication 4557, Safeguarding Taxpayer Data, and Publication 4299, Privacy, Confidentiality, and Civil Rights – A Public Trust.
- Timely Transmission: EROs are responsible for timely originating the electronic submission of returns.
- Providing Copies to Taxpayers: After e-filing, you must provide taxpayers with a copy of their completed tax return and any associated forms or acknowledgments.
- Record Retention: Continuously maintain records, especially signed Forms 8879, for the required period (typically three years from the return due date or IRS received date, whichever is later).
- Communication with Taxpayers: Inform clients about the status of their return, including IRS acknowledgment of receipt, and address any issues promptly.
- Staying Updated: Tax laws and IRS procedures change regularly. It's crucial to stay informed through IRS publications, news releases, and continuing education.
Sub-heading: Ethical Conduct
The IRS holds EROs to a high ethical standard. Key ethical considerations include:
- Prohibition of Unauthorized Disclosures: Do not disclose or use taxpayer information for purposes other than tax preparation without explicit written consent from the taxpayer. Violations can result in severe penalties.
- No Rental/Leasing/Purchasing of EFINs: Your EFIN is personal to your firm and cannot be rented, leased, purchased, or transferred.
- No Unreasonable Fees: ERO fees must be clearly disclosed, reasonable, and reflect the services provided. Avoid excessive charges, particularly those related to refund anticipation loans. A written agreement outlining fees should be provided to the taxpayer before services are rendered.
- Client Participation: Tax returns should generally be prepared with the taxpayer present or with their active participation.
Step 9: Consider Continuing Education
While specific continuing education (CE) requirements for EROs are primarily tied to broader tax preparer regulations (like those for Enrolled Agents or CPAs), it's highly recommended to engage in ongoing professional development.
Sub-heading: The Value of Lifelong Learning
- Stay Current with Tax Law Changes: Tax laws are constantly evolving. CE helps you remain proficient and avoid errors.
- Enhance Your Skills: Courses on new software, cybersecurity best practices, or specific tax niches can improve your service quality.
- IRS Tax Forums: The IRS often hosts tax forums and webinars that provide valuable updates and training for tax professionals.
Frequently Asked Questions (FAQs)
Here are 10 related FAQ questions to further assist you on your journey to becoming an IRS ERO:
How to become an ERO with the IRS? You become an ERO by applying online through the IRS e-services portal, passing a suitability check (including credit, tax compliance, and criminal background checks), and receiving your Electronic Filing Identification Number (EFIN).
QuickTip: Highlight useful points as you read.
How to verify ERO status or EFIN? The IRS does not offer a public tool to verify individual ERO status or EFINs. Your EFIN is issued directly to you upon approval and should be kept confidential.
How to renew ERO authorization? ERO authorization typically involves an annual renewal process where you re-verify your information and ensure continued compliance with IRS requirements. The IRS will provide guidance on the renewal process.
How to change ERO information (address, contact, etc.)? You can update your ERO information, such as address or contact details, through your IRS e-services account. It's crucial to keep this information current.
How to report ERO non-compliance or fraud? If you suspect ERO non-compliance or fraud, you can report it to the IRS. The IRS has procedures in place for addressing such issues to maintain the integrity of the e-file program.
How to get training to be an effective ERO? While the IRS doesn't mandate specific ERO training beyond the application process, it strongly recommends staying updated through IRS publications (like Publication 3112 and 1345), attending IRS tax forums, and pursuing continuing education from approved providers.
How to find approved tax software for EROs? The IRS maintains a list of approved e-file software vendors on its website. You should select software from a provider on this list to ensure compliance.
How to handle taxpayer authorization for e-filing (Form 8879)? EROs must obtain a signed Form 8879 from the taxpayer before electronically filing their return. This form serves as the taxpayer's consent and typically involves a self-selected PIN as their electronic signature.
How to protect client data as an ERO? Protecting client data is a critical responsibility. EROs must implement robust cybersecurity measures, secure physical and electronic records, and follow IRS guidelines outlined in publications like 4557 and 4299.
How to handle IRS rejections of e-filed returns? If an e-filed return is rejected by the IRS, the ERO is responsible for communicating the rejection to the taxpayer, identifying the reason for the rejection, making necessary corrections, and retransmitting the return in a timely manner.
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