I was remiss when I orginally published the post and didn't include a link for Notice 2010-85. Right now it's not showing on a search of IRS.gov. Here is the notice which includes contact info for comments.
Yesterday the IRS released Notice 2010-85 with the proposed rules for a tax return preparer to get a waiver from e-filing. In November of 2009, Congress mandated preparers to electronically file their client’s returns if they prepare over 10 returns. The IRS decided to phase this in and for 2010, the rules apply to preparers who file over 100 returns. In 2011, the threshold is down to 10. The IRS has developed two kinds of exemptions and finally released the details and procedures for requesting a waiver.
The first is an Administrative waiver. This waiver would be for specific forms or specific groups of tax preparers where the waiver would be necessary for efficient administration. While the IRS didn’t provide any details in their Notice, Form 5405 for taxpayers claiming the First Time Home Buyers Credit comes to mind. Taxpayers claiming the credit can’t e-file and must mail their return to the IRS.
The second waiver is a preparer hardship waiver and, if approved, gives the preparer permission not to e-file for that year. According to Notice 2010-85 is will be generally given for 1 year and the IRS will approve or deny based on the preparer’s specific facts and circumstances. Hardship is deemed to be more than just the cost of buying a computer and software. If this is a preparer’s only reason for requesting a waiver, the waiver will be rejected. The waiver will be requested on Form 8944 and will be submitted with documentation to substantiate the tax preparer’s request. The following info will need to be on the form or a substitute statement:
- The preparer’s name, address, phone, email
- Their PTIN or firm’s EIN
- Reason for requesting the waiver.
- Financial hardship
- Personal hardship- could be a personal financial issue, bankruptcy or other issue
- Other hardship-technical or system based, client based.
- Calendar year you are requesting the waiver for.
- Type of form or forms the waiver will apply to
- Preparer’s history of filing for clients and an estimate of the number of returns the preparer expects to file.
- What processes, systems and technologies the preparer uses to prepare and file returns.
- Why e-filing will be a hardship and what the preparer has done to solve the problem. The preparer will need to provide to the IRS how much they usually earn from preparing returns, how much the change over will cost with documentation itemizing the cost (2 sources) and if increasing fees could offset the new costs.
- Other personal, non-financial hardship that will affect the business.
- What the preparer has done to try to e-file and results of those actions.
- What they have or will take to make sure they can e-file in the future.
- Other info the preparer feels may help their case.
- The form needs to be signed and dated under penalty of perjury.
- Form 8944 should be submitted between Oct 1 of the year preceding the beginning of the calendar year and Feb 15th of that year. This is to give the IRS time to process and time for the preparer to apply to e-file if denied.
- The IRS will send an approval or a denial letter to the preparer. This is not a time when “no news is good news” applies. If the preparer doesn’t receive an approval letter, they are considered denied.
- If they are denied, the preparer can request reconsideration and submit more info if it’s available.. If this doesn’t work, the preparer has no further reconsideration or right to judicial review.
The notice seems very short notice to get a waiver for this year. One reason given for requesting the waiver in October is if it is denied, it gives the tax preparer time to get an EFIN (electronic filing number) and get set up to e-file. A preparer requesting a waiver right now could not get a decision on the waiver and an EFIN by the middle of January when e-filing opens. Since this is a proposed regulation, I would think that the IRS is gearing up for next year when the threshold is the 10 returns that Congress mandated. But these are proposed regulations and may change considerable before the final set are released.