An Electronic Return Originator (ERO) is a tax professional or service provider authorized by the IRS to prepare and submit tax returns electronically. EROs play a critical role in the modern tax filing ecosystem, streamlining the process for both taxpayers and the IRS.
Understanding the Role of an ERO
Duties and Responsibilities
An ERO’s primary responsibility is to ensure that individual and business tax returns are accurately prepared and electronically filed. The process involves:
- Validation and Verification: Ensuring correct and complete information is collected.
- Preparing Returns: Using IRS-approved software to prepare tax returns.
- Electronic Filing: Submitting returns electronically to the IRS using the approved e-filing system.
Qualifications and Approval Process
To become an ERO, tax professionals must meet certain qualifications and undergo an approval process by the IRS:
- EIN and PTIN: EROs must have an Employer Identification Number (EIN) and a Preparer Tax Identification Number (PTIN).
- Application: They must complete the IRS e-file application.
- Suitability Check: The IRS performs a suitability check, including a credit history and criminal background check.
Advantages of Using an ERO
- Efficiency: Electronic filing is faster and reduces the risk of errors.
- Accuracy: EROs use advanced software, minimizing manual errors.
- Speed of Refunds: Taxpayers who file electronically often receive their refunds faster.
- Environmental Impact: Reduced paper usage is environmentally friendly.
Historical Context
Evolution of Electronic Filing
The concept of electronic filing began in the 1980s with pilot programs conducted by the IRS. By the mid-1990s, electronic filing had become more widespread, and by the early 2000s, it had become the standard method for submitting tax returns.
Legislative Milestones
- 1998: IRS Restructuring and Reform Act: This act set goals for increasing electronic filing rates.
- 2000s: E-File Mandates: Various mandates and incentives were introduced to promote e-filing.
Related Terms
- Preparer Tax Identification Number (PTIN): A unique identifier for tax preparers.
- Employer Identification Number (EIN): A unique identifier for businesses.
- IRS e-file: The electronic system used by the IRS for filing tax returns.
FAQs
What is the benefit of filing electronically?
Filing electronically reduces errors, speeds up processing times, and allows for quicker refunds.
Is it mandatory to file electronically?
While not mandatory for all taxpayers, many tax professionals and businesses are required to file electronically based on IRS regulations.
How do I know if my ERO is legitimate?
You can verify the ERO’s credentials by checking their PTIN and EIN and confirming their status with the IRS.
Summary
In summary, an Electronic Return Originator (ERO) is a pivotal figure in the tax filing process, enhancing accuracy, efficiency, and compliance. By transitioning from paper-based to electronic filing, the ERO contributes to a more streamlined and environmentally-friendly tax system.
References
- Internal Revenue Service (IRS). “E-File Options for Business and Self-Employed.” IRS. Available at: IRS.gov
- National Association of Tax Professionals. “What is an ERO?” NATP. Available at: NATP.org
This entry provides a comprehensive overview of the Electronic Return Originator (ERO), outlining their role, responsibilities, and the benefits they bring to the tax filing process.
