Updated: Aug 14, 2018
EFIN or EFIN number also known as Electronic Filing Number is required by any tax preparer who anticipates preparing and filing 11 or more Forms 1040 during a calendar year unless the preparer or a particular return is administratively exempt from the e-file requirement or the return is filed by a preparer with an approved hardship waiver according to the IRS.
Here are the seven tips to keep in mind when applying for your EFIN.
Apply early. If you are planning or thinking about opening a tax office, you should consider applying for your efin early. Although the IRS list on their website that it can take up to 45 days for approval, it has taken longer for some. The IRS is known for having glitches and experiencing issues, therefore, to avoid the havoc, apply early.
An EFIN is not the same as EIN. There has been confusion for new tax business owners whether an EIN and an EFIN are the same thing. The answer is NO. EINs are attached to your business. It is similar to your business social security number. An EFIN is a business social security number in the tax industry. It is the authority that you need to operate a tax business. It also tracks the number of tax returns you file, who files under your EFIN, it provides the IRS with the information about the tax returns that are filed under that number.
One EFIN is issued per office. One only EFIN can be used at a location. Therefore, if you plan on having more than one location, you need more than one EFIN.
You are responsible for tax returns filed under your EFIN. As an EFIN owner, you are liable for the tax returns filed under your office, therefore, make sure you have an audit process in place and your tax team is getting the adequate training in order to comply with Circular 230.
Determine your legal structure before applying for an EFIN. You must decide if you are going to apply for an EFIN with your social security or as a sole proprietorship or a legally registered business. If you apply as a legal business, you will need your EIN and the business name exactly as registered with the IRS.
You can not apply for a Bank product with an EFIN. A bank product is used if your tax client is not paying their tax preparation fee out of pocket. When you apply for a bank product, the taxpayer's refund goes directly to a third party bank. That bank will then distribute the tax business their tax preparation fees and other fees that belong to them, additional fees from the bank, transmittal company, software company, and any other fees that may apply, then the client will receive the additional refund. Some taxpayers may desire to pay their tax prep out of pocket in order to avoid any other fees.
You can not use a professional tax software with an EFIN. Once you receive your EFIN then you will be able to electronically file the tax return through the professional tax software. However, can you not official use the professional tax software until you receive your EFIN.
They IRS will check your background. According to the IRS, after your submit your application and related documents, the IRS will conduct a suitability check on the firm and each person listed on your application as either a principle or responsible official. This may include: a credit check, a tax compliance check, a criminal background check, and a check for prior non-compliance with IRS E-file requirements.
Are you ready to apply for your EFIN number? If you are, click here to get started.