Filing taxes can be complicated, and often requires you to have information on hand that you might not have expected to enter. Many need to enter an electronic filing identification number (EFIN) to file digitally, for example, and doing so online makes the overall process much easier:
- It often means immediate checks on your tax forms.
- You get the knowledge that you have securely filed your taxes.
- That means you won’t have to wait for the Internal Revenue Service (IRS) to receive your taxes, or worry that things might not have gone through according to plan.
Do you have an EFIN? Take a look at this guide to learn more about what they are, how to apply for one, and what to do if your EFIN application is denied.
What is an EFIN?
An electronic filing identification number is issued by the IRS to individuals or entities that are “authorized e-filing providers,” that is, entities authorized to file taxes on behalf of another entity online. The IRS mandates that any entity filing more than 10 tax returns must have an EFIN.
To apply for an EFIN, you may need to go through:
- A background check
- A tax compliance check
- A credit check
Applying for an EFIN can be a complex process, but it’s also well worth it for entities that intend to work as tax preparers. Here’s what to keep in mind:
- Sole proprietors, or individual entrepreneurs who work in tax preparation, will need EFINs to file taxes for their clients electronically.
- Partners and corporate officers in large firms should possess EFINs.
- Other individuals within the company may want to apply for one to bolster the firm’s professional success.
Knowing that multiple partners hold an EFIN will also make it easier for your business to continue tax preparation services if one partner dies or leaves the company.
What Are the Perks of Having an EFIN?
According to the IRS, as of 2012, any entity that files 11 or more tax returns over the course of a calendar year must have an EFIN to conduct those transactions. Even a smaller business that prepares fewer tax returns may see some benefits from having an EFIN, including:
Decreased Processing Time
By using the e-file system, you can decrease the time you will need to spend filing client tax returns.
This means a streamlined process and less time spent dealing with each individual client, which means you can instead focus on expanding your business.
Being able to e-file can also significantly decrease the stress you may otherwise experience around tax time each year.
Faster Returns for Clients
If your clients are due a tax refund, they often want those funds in their hands as soon as possible.
They may have bills they have been putting off, for example, or challenges they need to deal with as they manage their finances.
When you have an EFIN, you can streamline their ability to get their refunds in hand.
Set Your Small Business Up for Success
Having an EFIN is critical if you want to grow your tax preparation business. Without one, you can file only up to 10 individuals’ tax returns each year, which will not leave you much room for growth.
Understanding the benefits goes a long way toward making the complex process of applying for an EFIN seem worthwhile for companies of all sizes.
5 Steps to Apply for an EFIN
Applying for an EFIN takes an average of 45 days and may involve some complexity, but that does not necessarily mean it is a complicated process up front. To apply for an EFIN, you must:
1. Gather the information you need
To apply for an EFIN, you will need:
- Your name and Social Security number
- Your bank account information
- Your tax filing status
- A copy of your last tax return
- Information about any loans you currently hold
Make sure you have this on hand before you begin the application to streamline the process.
2. Visit the IRS E-Services page
Start by creating an account that will allow you to access the various services the IRS manages online.
3. Follow the steps to create your account
The website will walk you through the process. Make sure you clearly and accurately enter all information requested by the forms.
4. Submit your fingerprint card.
In addition to the electronic documentation and information requested, you will need to submit a copy of a fingerprint card from your office.
5. Answer any personal questions
These questions will determine your suitability as a candidate. The IRS wants to ensure that individuals who hold an EFIN will use it ethically, to aid others in tax prep and submission, and not for illegal or unethical purposes.
A tax professional can help you along the way should you run into any problems or think of any questions about the EFIN application process. It’s always best to seek the advice of a qualified expert to ensure your company does things the right way.
3 Common Mistakes in the EFIN Application Process
As you apply for your EFIN, you may run into issues along the way. Prepare for and avoid them ahead of time to make the most of your application and keep your business moving smoothly.
1. You must choose the right provider type.
Your business may need to qualify as both a transmitter and an electronic return originator, for example. Make sure you understand your company’s needs and how they apply to your application.
2. Make sure you submit your fingerprint cards in a timely manner.
Contact the IRS within 48 hours of submitting your application to request a fingerprint card. Your local sheriff’s office may be able to conduct your fingerprints or guide you to a location that can perform that task for you.
3. Make sure you are suitable for approval.
If there are any reasons why you would not be suitable — including criminal history or past failure to adhere to e-filing standards— do your best to correct them before applying, or outsource these services to an accredited firm. Make sure you’re familiar with tax details like how a foreign bank account can impact your taxes or reduce small business income taxes legally, for example, and that you have not made past tax errors that you need to correct.
Denied for an EFIN? Get Help from the Experts
Was your EFIN application denied? Are you or your clients in need of tax filing services? Contact Silver Tax Group today for help or to speak with an expert about any EFIN questions you might have.
