What Is an EFIN and How to File an EFIN Application

Given all the legal jargon and acronyms—EFIN included—understanding tax codes in the United States can understandably be a challenge for taxpayers. So much so that many Americans hire professional tax preparation services to streamline the process of paying their taxes. But if you want to use the IRS e-file service to file taxes on behalf of your clients, your tax preparation business must obtain an Electronic Filing Identification Number (EFIN). Applying for an EFIN involves suitability checks and other complex processes, which may seem daunting. But not to worry, this guide covers everything you need to know about EFINs!

What Is an EFIN?

An Electronic Filing Identification Number (EFIN) is a 6-digit tax identification number issued by the IRS. It verifies that you have the right to use the IRS e-file system to prepare taxes for clients. Once your business obtains an EFIN, it is considered an “Authorized IRS e-file Provider.”

Tax preparation businesses require an EFIN to access the IRS e-file platform. As such, it’s an integral number for modern tax businesses in the United States. The tax firm that applies for the EFIN retains ownership of the number—not the owner of the firm or its employees. However, if the firm’s owners sell their business to a new owner, the new owner needs to reapply for an EFIN to continue using the IRS e-file platform.

It’s worth noting that an EFIN differs from a Preparer Tax Identification Number (PTIN). All paid tax preparers must have a PTIN, and this number is attributed to the individual tax preparer, not the tax preparation firm.^[1]IRS. “PTIN Requirements for Tax Return Preparers.” Accessed June 30, 2023. Likewise, a PTIN is necessary for all forms of tax preparation, not just IRS e-file taxes.

Your firm only needs an EFIN if it plans to submit taxes electronically. While you can still submit paper tax returns without an EFIN, most modern tax preparation services use the IRS e-file service. If you want to provide tax preparation services at scale, it’s hard to avoid needing an EFIN.

Electronic filing has become more essential than ever to the US tax system. In the past, paper submissions made it challenging for the IRS to monitor tax returns for the entire nation. In 2002, the IRS removed the need for signatures and allowed for PINs instead, paving the way for the electronic filing process to take over.^[2]eFile. “e-File History: Electronic Tax Filing in the United States.” Accessed June 30, 2023. For the past 20 years, American taxpayers have become increasingly reliant on the e-file system, with the vast majority of taxpayers now submitting their returns electronically.

Who Needs to Apply for an EFIN?

Any firm wanting to use the IRS e-file platform to prepare taxes for clients will require an EFIN. Without an EFIN, a business is not an Authorized IRS e-file Provider and does not have permission to submit taxes electronically.

The individuals within your firm required to fill out the EFIN application are the Principals and Responsible Officials, although it’s only a single application. These individuals hold enough seniority in your firm to require additional checks by the IRS.

Your firm only needs a single EFIN to provide electronic tax preparation services. The owners and individuals working for your firm will not require individual EFINs. However, as mentioned previously, all tax preparers in your business will require PTINs.

Eligible Principals and Responsible Officials

In order to apply for an EFIN, your business must understand the role of the Principals and Responsible Officials. The IRS will conduct due diligence on Principals and Responsible Officials during the application process. They must adhere to strict standards if you want your business to attain an EFIN. The IRS will perform credit checks, tax return checks, and other suitability checks to determine eligibility.

As discussed previously, your tax preparation business only needs one EFIN. Your Principals and Responsible Officials do not need to apply for separate numbers. However, all Principal and Responsible Official details must be included in the application so that the IRS can perform the required checks.

Principals include the following individuals within your organization:

• In the case of a business run by a single person, the sole proprietor is the Principal.
• Any partner with five percent (or more) ownership of the business is a Principal.
• All corporate officers are Principals; this includes the President, Vice President, Treasurer, and Secretary.
• Other key individuals may also be Principals. For example, if someone aside from the owner or partners is primarily responsible for tax preparation, they should be listed as a Principal.

In addition to Principals, you must also include details about Responsible Officials. A Responsible Official is an individual with control over the business’s e-file operation. In some cases, an individual may simultaneously be a Principal and Responsible Official.

Also, don’t worry if you plan on hiring more individuals in the future. You only need to submit information regarding current Principals and Responsible Officials during the initial application process. However, if you do hire additional Principals or Responsible Officials, you should update their details with the IRS.

The IRS has restrictions regarding who can be a Principal or Responsible Official. Here are the three requirements below:

• Be 18+ at the time of application
• Be a US Citizen or a foreigner with permanent residency
• Meet your business’s state and local bonding/licensing standards for the tax preparation industry

EFIN Application Requirements

Before you begin an EFIN application, you should collect all the details and documents you need to apply. You will need to gather relevant information from all the Principals and Responsible Officials, as the IRS will need to carry out verification checks on all these individuals. Below, let’s explore the core EFIN application requirements for the relevant individuals in your firm:

• Social Security Number (SSN)
• Last-Filed Tax Return
• Tax Filing Status
• Mobile Device Number
• Current Email Address
• Account Numbers for the Following Personal Accounts:
  • Credit cards
  • Car loans
  • Home mortgage loans
  • HELOCs
  • Home equity loans

Collecting the above details before starting your application will save you time and help avoid confusion!

How to Apply for an EFIN

The EFIN application process is slightly more complicated than applying for other tax identification numbers from the IRS. Let’s explore the five-step process in more detail below:

1. Set up an IRS e-services account

If your business needs an EFIN to begin processing electronic tax returns, start by setting up an IRS e-service account. If you don’t have an IRS username, you will need to head to the IRS website and sign up via ID.me. This service will verify your identity for the IRS. The sign-up process will only take a few minutes, but you will need your personal details on hand to complete the process.

2. Submit your application 

Once you’re in your IRS e-service account, you need to input your firm’s information. Next, all your Principals and Responsible Officials must submit information, including a fingerprint card. They will also need to answer personal questions, agree to the Terms of Agreement, and declare that all provided information is correct.

Mail fingerprint cards to the following address: Attn: EFU Acceptance, Testing Stop 983, 310 Lowell Street, Andover, MA 01812.

Remember, you will need all the information from the EFIN Application Requirements section of this guide during the application process. Collecting this information before applying will make the process much smoother.

3. Pass the suitability check

Once you submit your application, you will need to wait for the IRS to conduct a suitability check. Not only does this involve an inspection of you and your firm, but it will also involve a suitability check on the Responsible Officials and Principals in your business. So, what does a suitability check involve?

1. Credit score checks
2. Tax compliance checks
3. Non-compliance with IRS e-file requirements checks
4. Criminal background checks

This stage of the application process takes time. Ensure all the members of your firm that will be undergoing checks are in good standing. You don’t want any surprises to derail your business during this time.

4. Choose a provider option for your EFIN

Next, choose a “Provider Option.” The option you select must be approved by the IRS. Fortunately, you can search for authorized e-file providers via the IRS website. This search function allows you to input a zip code and state to find providers closest to you!

5. Check for approval

It’s time to check if the IRS approved your application! To check on your EFIN’s current status, log into your IRS e-Services account. On the homepage’s toolbar, select “EFIN Status.” This button will redirect you to a page displaying your EFIN application status. If it says active, you have an EFIN, and you are now an Authorized IRS e-file Provider!

Don’t forget: The application process can take up to 45 days, so don’t worry if you don’t see a change in your status in the initial weeks following your application.

How to Submit an EFIN Renewal

Fortunately, EFINs do not expire, meaning your business won’t need to submit an EFIN renewal. Just make sure you continue to use the IRS e-file platform annually. If you haven’t used your EFIN in the past two years, the IRS will contact you and provide 60 days for you to reactivate your EFIN. If you fail to do so, you will be removed from the Authorized IRS e-file Provider list, and you must lodge another application to regain access to an EFIN.

Also, if you change your business’s name or your Employer Identification Number (EIN), you must contact the IRS. You may need to apply for another EFIN, in certain cases.

Lastly, if the IRS suspects your EFIN has been compromised, they will contact you to help you attain a new EFIN. This may occur if a fraudster uses your EFIN to lodge tax returns without your knowledge. To avoid this, it’s worth checking your EFIN status to view how many returns are being filed under your EFIN. If the number is too high, contact the IRS immediately.

Electronic Filing Identification Number: Closing Thoughts

With more than 150,000,0000 tax returns filed on e-file in 2021, there’s bountiful of room to enter the tax business.^[3]eFile. “Income Tax Return, e-File Statistics.” Accessed June 30, 2023. If you want to start a tax preparation business, you now have the tools you need to apply for an EFIN. Remember, as applying for EFINs involves a suitability check, ensuring all your Principals and Responsible Officials have good credit histories is critical.

Once you access your EFIN and begin preparing taxes for your clients, it’s important to partner with an affordable payment processor. Don’t underestimate the power of credit card processing—it makes purchasing your services much more convenient for your clients!

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