An Electronic Filing Identification Number (EFIN) is a unique identification number issued by the Internal Revenue Service (IRS) to authorized Electronic Return Originators (EROs). This number enables EROs to file tax returns electronically on behalf of individuals and businesses.
Purpose of EFIN
The EFIN is critical for ensuring the security and integrity of electronically filed tax returns. It helps the IRS verify the identity of organizations transmitting tax returns and prevents fraudulent activities.
Obtaining an EFIN
To obtain an EFIN, organizations must complete the IRS e-file application process. This involves the following steps:
- Create an IRS e-Services Account: Potential EROs must first create an account on the IRS e-Services website.
- Submit an e-File Application: The application requires detailed information about the business, including personal identity verification for all principal and responsible officials.
- Suitability Check: The IRS conducts a suitability check to ensure the organization and its key individuals are compliant with IRS regulations and have no criminal backgrounds or outstanding tax obligations.
Maintenance of EFIN
After receiving an EFIN, EROs must follow specific requirements:
- Comply with IRS e-file rules and regulations.
- Keep the IRS updated with any changes to the organization’s structure or personnel.
- Renew the application periodically as required by the IRS.
Historical Context
The EFIN came into existence as part of the IRS’s initiative to modernize tax return processing and enhance security. The shift from paper filing to electronic filing aimed to streamline the tax submission process, reduce errors, and quicken refund issuance.
Applicability
- Tax Professionals: Certified Public Accountants (CPAs), Enrolled Agents (EAs), and other tax professionals need an EFIN to e-file tax returns for clients.
- Tax Software Companies: Developers of tax preparation software must obtain an EFIN to ensure compliance and to offer e-filing capabilities in their products.
Special Considerations
- Security: EROs must implement robust security measures to protect client data and comply with IRS Publication 4557, which outlines the security requirements for safeguarding taxpayer information.
- Penalties: Misuse of an EFIN can result in penalties, suspension from the e-file program, and other legal consequences.
Examples
Example 1: CPA Firm
A CPA firm applies for and receives an EFIN to electronically file tax returns for its clients. The firm follows all IRS e-file regulations and updates the IRS about any changes in the firm’s structure.
Example 2: Tax Software Developer
A company developing a new tax software application applies for an EFIN. The application is reviewed, and a suitability check is conducted before the IRS issues an EFIN, authorizing the software to handle e-filing.
Related Terms
- ERO (Electronic Return Originator): An authorized entity that originates the electronic submission of tax returns to the IRS.
- PTIN (Preparer Tax Identification Number): A number issued by the IRS to tax return preparers to identify them on returns they prepare.
- TIN (Taxpayer Identification Number): A general term for any type of number that the IRS uses to identify a taxpayer.
Frequently Asked Questions (FAQs)
What happens if my EFIN application is denied?
If your EFIN application is denied, you can appeal the decision by providing additional information or documentation to address the IRS’s concerns.
How long does it take to get an EFIN?
The process to obtain an EFIN can take several weeks, depending on the complexity of the application and the volume of applications being processed by the IRS.
Can I transfer my EFIN to another entity?
No, EFINs are specific to the entity and cannot be transferred. If a new entity is formed, a new EFIN must be obtained.
References
- IRS Publication 3112, “Applying and Participating in IRS e-file”
- IRS e-Services website
- IRS Publication 4557, “Safeguarding Taxpayer Data”
Summary
The Electronic Filing Identification Number (EFIN) is an essential component of the IRS’s e-file program, designed to streamline tax return processing and enhance security. By ensuring that only authorized EROs can submit electronic tax returns, the EFIN helps maintain the integrity of the tax filing system. Obtaining an EFIN requires a thorough application process and strict adherence to IRS regulations to protect taxpayer information and prevent fraud.
