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:
What Are the Perks of Having an EFIN?
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
1. Gather the information you need
2. Visit the IRS E-Services page
3. Follow the steps to create your account
4. Submit your fingerprint card.
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
1. You must choose the right provider type.
2. Make sure you submit your fingerprint cards in a timely manner.
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.