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.02 For purposes of this revenue procedure, an on-line electronically filed Form 1040, Form 1040A, or Form 1040EZ is a composite return consisting of electronically transmitted data and certain paper documents. The paper portion of the return consists of Form 8453-OL, U.S. Individual Income Tax Declaration for On-Line Filing, and other paper documents that cannot be electronically transmitted. Form 8453-OL must be received by the Service before the composite return is considered filed (see section 5.07 of this revenue procedure). The composite return must contain the same information that a return filed completely on paper contains. See section 7 of this revenue procedure for procedures for completing Form 8453-OL.
.03 Each year prior to the start of the filing season, the Service will issue Publication 1345A, Filing Season Supplement for Electronic Return Originators, and Publication 1346, Electronic Return File Specifications and Record Layouts for Individual Income Tax Returns. These publications list the forms and schedules associated with the Form 1040 series that can be electronically transmitted during the upcoming filing season.
.04 For purposes of the Form 1040 On-Line Filing Program, a Form 1040, Form 1040A, or Form 1040EZ for any taxable year cannot be electronically filed after the 15th day of October following the close of that taxable year, notwithstanding the fact that the taxpayer has been granted an extension to file a return beyond that date. If the 15th day of October falls on a Saturday, Sunday, or legal holiday, then the electronically filed return may be filed on the next succeeding day which is not a Saturday, Sunday, or legal holiday.
.05 An amended tax return cannot be electronically filed under the Form 1040 On-Line Filing Program. A taxpayer must file an amended tax return on paper in accordance with the instructions for Form 1040X, Amended U.S. Individual Income Tax Return.
.06 A tax return that has a foreign address for the taxpayer cannot be electronically filed under the Form 1040 On-Line Filing Program. Army/Air Force (APO) and Fleet (FPO) post offices are not considered foreign addresses for this purpose.
.07 A tax return for a decedent cannot be electronically filed under the Form 1040 On-Line Filing Program. The decedent's spouse or personal representative must file a paper tax return for the decedent.
.08 Some of the updates and changes to Rev. Proc. 97-61 are as follows:
401k Tips and Facts:
According to Southern California-based (401k) Enginuity
(www.401kenginuity.com), twenty-year veteran in developing and running 401(k) administration and 401(k) software and recordkeeping systems, the Internet will be the primary delivery system for 401(k)s by 2007. Many web-based 401(k) plans will run on administration and recordkeeping platforms that plan providers will outsource to 401k specialists and 401k Application Service Providers (ASP).
The advantages of web-based online 401(k) plans are obvious to today's workers, and include use conveniences, real-time monitoring and reporting, and instant re-allocation of their retirement assets. The internet has also dramatically reduce the cost of 401(k) plan administration, saving plan sponsor 50% or more in ongoing fees and costs when compared to the older traditional labor-intensive plans. Outsourcing of 401(k) functions by plan providers will extend the trend towards lower cost, high-quality 401(k) products.
401(k) plan providers of all types, financial institutions including banks, insurance companies, brokerages, mutual fund companies, credit unions, and third-party administrators, are now actively outsourcing 401(k) administration and recordkeeping tasks to 401(k) ASPs --- vendors such as 401k Enginuity, whose sole function is to maintain, updated and supervise software-based 401(k) administration and recordkeeping systems on behalf of plan providers. 401(k) ASP vendors are responsible for all routine day-to-day 401(k) recordkeeping and administration functions, thus allowing the plan providers to reduce internal staff, eliminate the expense and complications of licensing, housing and running hardware and 401(k) administration software in-house. Plan providers can refocus and concentrate their efforts on to the needs of their plan sponsors and plan participants, and rely upon the outsourced ASP 401(k) vendor for the recordkeeping and technical "backbone" supporting providers' Internet-based plans. It is inevitable that some of this 401(k) outsourcing to ASPs will include secondary outsourcing of certain non-critical low-level routine day-to-day tasks to non-US locations, where labor costs are less yet the expertise is abundant.
.01 After acceptance into the Form 1040 On-Line Filing Program, as described in section 4 of this revenue procedure, a participant is referred to as an "On-Line Filer."
.02 The On-Line Filer categories are:
.03 The On-Line Filer categories are not mutually exclusive. For example, a Software Developer can, at the same time, be considered a Transmitter or an On-Line Service Provider depending on the function(s) performed.
.02 Applicants must file a new Form 8633, Application to Participate in the IRS e-file Program, with completed fingerprint cards for the appropriate individuals, if:
Applicants must designate that the Form 8633 is for the Form 1040 On-Line Filing Program by checking the box titled "ON-LINE FILING."
.03 An On-Line Filer must submit a revised Form 8633 (designated for the Form 1040 On-Line Filing Program as described in section 4.02 of this revenue procedure), signed by all "Principals" and the "Responsible Official" (as described in section 4.12 of this revenue procedure), with completed fingerprint cards for those appropriate individuals who have not submitted a fingerprint card with a previously accepted application, if:
.04 Except as provided in section 4.03 of this revenue procedure, an On-Line Filer must submit either a revised Form 8633 (designated for the Form 1040 On-Line Filing Program as described in section 4.02 of this revenue procedure), or a letter containing the same information contained in a revised Form 8633, if any information on the On-Line Filer's Form 8633 has changed. A revised Form 8633 or letter submitted under this section should include only the changed information and the following identifying information:
A Principal or the Responsible Official must sign the revised Form 8633 or the letter.
.05 For applicants described in section 4.02 of this revenue procedure, the application period begins on the 1st day of August preceding the filing season during which they intend to participate in the Form 1040 On-Line Filing Program. The application period continues into the filing season (see the Form 8633 instructions for the last date to file a new application); however, applications submitted after the 1st day of December preceding the filing season may not be processed in time for the applicant to participate in the Form 1040 On-Line Filing Program by the start of the filing season.
.06 Revised applications described in sections 4.03 and 4.04 of this revenue procedure must be submitted within 30 days of the change(s) reflected on the revised Form 8633 or in the letter. On-Line Filers that fail to submit revised applications may be temporarily dropped from the Form 1040 On-Line Filing Program.
.07 Applicants and On-Line Filers described in sections 4.02 through 4.04 of this revenue procedure must file Form 8633 (or a letter as provided in section 4.04 of this revenue procedure) with the Application Processing Center at the address listed in the instructions for Form 8633.
.08 Applicants described in section 4.02 that submit their applications on or before the 31st day of December preceding the filing season must submit the following information (or the name and phone number of an individual who can provide the information) to the IRS Headquarters Form 1040 On-Line Filing Program Analyst (see section 18 of this revenue procedure) no later than the 31st day of December preceding the filing season:
.09 Applicants described in section 4.02 that do not submit their applications on or before the 31st day of December preceding the filing season during which they intend to participate must submit the information described in sections 4.08(1) through (4) at the time they submit their applications.
.10 On-Line Filers must submit any changes to the information contained in sections 4.08(1) through (4) of this revenue procedure to the IRS Headquarters Form 1040 On-Line Filing Program Analyst by the 31st day of December preceding the next filing season.
.11 Applicants and On-Line Filers described in sections 4.01 through 4.04 of this revenue procedure that intend to participate as a Transmitter or a Software Developer in the Form 1040 On-Line Filing Program must first successfully complete the necessary testing at the appropriate service center(s). Such testing must be completed for each filing season during which the applicant or On-Line Filer intends to participate as a Transmitter or Software Developer.
.12 Each individual listed as a Principal or a Responsible Official on a Form 8633 must:
.13 In lieu of a standard fingerprint card, an individual may choose to submit evidence that the individual is:
.14 The Service will issue credentials each year to eligible applicants, On-Line Filers that do not have to reapply pursuant to section 4.01 of this revenue procedure, and On-Line Filers that comply with section 4.03 or 4.04 of this revenue procedure, provided they have first satisfactorily completed the testing described in section 4.11 of this revenue procedure if they intend to participate as a Transmitter or Software Developer. No one may participate in the Form 1040 On-Line Filing Program without the following credentials:
.15 If an On-Line Filer is a Software Developer that performs no other function in the Form 1040 On-Line Filing Program but software development, no Principal or Responsible Official needs to pass a suitability check.
.16 The Service may reject an application to participate in the Form 1040 On-Line Filing Program for the following reasons (this list is not all-inclusive). These reasons apply to any firm, organization, Principal, or Responsible Official listed on Form 8633:
.02 An On-Line Filer must maintain a high degree of integrity, compliance, and accuracy.
.03 An On-Line Filer may accept returns for the Form 1040 On-Line Filing Program only from the taxpayer filing the return or from another On-Line Filer.
.04 If an On-Line Filer charges a fee for the transmission of the electronic portion of a tax return, the fee may not be based on a percentage of the refund amount or any other amount from the tax return.
.05 An On-Line Filer must submit a revised Form 8633 (or a letter as provided in section 4.04 of this revenue procedure) to the Application Processing Center within 30 days of when any of the conditions or changes described in section 4.03 or 4.04 of this revenue procedure occur. See section 4.06 of this revenue procedure.
.06 An On-Line Filer must notify the Application Processing Center (at the address listed in the instructions for Form 8633) within 30 days of discontinuing its participation in the Form 1040 On-Line Filing Program. This does not preclude reapplication in the future.
.07 An On-Line Filer must ensure that it promptly processes returns submitted to it for electronic filing. See sections 5.09, 5.10, and 5.11 of this revenue procedure. However, an On-Line Filer that receives a return for electronic filing on or before the due date of the return must ensure that the electronic portion of the return is transmitted on or before that due date (including extensions). An electronically filed return is not considered filed until the electronic portion of the tax return has been acknowledged by the Service as accepted for processing and a completed and signed Form 8453-OL has been received by the Service. However, if the electronic portion of a return is successfully transmitted on or shortly before the due date and the taxpayer complies with section 7.01 of this revenue procedure, the return will be deemed timely filed. If the electronic portion of a return is transmitted on or shortly before the due date and is ultimately rejected, but the taxpayer complies with section 5.18 of this revenue procedure, the return will be deemed timely filed. For a balance due return, see section 10 of this revenue procedure for instructions on how to make a timely payment of tax.
.08 An On-Line Filer must ensure against the unauthorized use of its EFIN or ETIN. An On-Line Filer must not transfer its EFIN or ETIN by sale, loan, gift, or otherwise to another entity.
.09 An On-Line Filer that participates as an On-Line Service Provider must:
.10 An On-Line Filer that participates as a Software Developer must:
.11 An On-Line Filer that participates as a Transmitter must:
.12 A Transmitter must include an On-Line Service Provider's EFIN on each return that the Transmitter accepts from an On-Line Service Provider.
.13 A Transmitter must enter the letter "O" in the Trans Record "A" as the "Transmission Type Code" when transmitting the electronic portion of an on-line electronically filed return to the Service.
.14 A Transmitter must ensure that it does not combine, within the same transmission to the Service, the electronic portion of a return filed under the Form 1040 On-Line Filing Program with the electronic portion of a return filed under any other electronic filing program.
.15 A Transmitter must ensure that it does not use an EFIN or ETIN obtained through the Form 1040 IRS e-file Program in a transmission of the electronic portion of a taxpayer's return as part of the Form 1040 On-Line Filing Program.
.16 If the Service accepts the electronic portion of a taxpayer's return, the Transmitter must notify the taxpayer (as prescribed in section 5.19 of this revenue procedure) of the following:
.17 If the Service informs the Transmitter (in an acknowledgement file) that the electronic portion of a taxpayer's return has been rejected, the Transmitter must notify the taxpayer, as prescribed in section 5.19 of this revenue procedure, of the following:
.18 If the taxpayer chooses not to have the electronic portion of the return corrected and transmitted to the Service, or if the electronic portion of the return cannot be accepted for processing by the Service, the taxpayer must file a paper return by the later of:
The paper return should include an explanation of why the return is being filed after the due date.
.19 A Transmitter that transmits a return of a taxpayer who is a subscriber of an On-Line Service Provider must notify the taxpayer by sending an electronic transmission to the On-Line Service Provider within two work days of retrieving the acknowledgement file. A Transmitter that transmits a return of a taxpayer who is not a subscriber of an On-Line Service Provider must notify the taxpayer by:
.20 A Transmitter must make available to the Service upon request all items required by this section to be retained until the end of the calendar year in which a return was filed. The Transmitter must make this material available either at the business address of the Transmitter or from the contact representative named on Form 8633.
.21 A Transmitter is responsible for ensuring that stockpiling does not occur. Stockpiling means collecting returns from taxpayers prior to official acceptance into the Form 1040 On-Line Filing Program, or, after official acceptance into the Form 1040 On-Line Filing Program, waiting more than three calendar days to transmit a return to the Service after receiving the information necessary for transmission of the electronic portion of a tax return.
.22 An On-Line Filer may not offer, nor in any way participate in or facilitate, a Refund Anticipation Loan (RAL) in connection with any return filed under the Form 1040 On-Line Filing Program. A RAL is money borrowed by a taxpayer that is based on a taxpayer's anticipated income tax refund.
.23 An On-Line Filer may not charge a separate fee for a Direct Deposit. See section 9 of this revenue procedure.
.24 In addition to the specific responsibilities described in this section, an On-Line Filer must meet all the requirements in this revenue procedure to keep the privilege of participating in the Form 1040 On-Line Filing Program.
.02 Other Preparer Penalties.
.03 Other Penalties. In addition to the above specified provisions, the Service reserves the right to assert all appropriate preparer, nonpreparer, and disclosure penalties against an On-Line Filer as warranted under the circumstances.
.02 Missing Form 8453-OL. If the Service determines that a Form 8453-OL is missing, the taxpayer must provide the Service with a replacement. A taxpayer must also provide a copy of any Form(s) W-2, W-2G, 1099-R, and all other attachments to Form 8453-OL.
.03 Substitute Form 8453-OL. If a substitute Form 8453-OL is used, it must be approved by the Service prior to use.
.02 The Transmitter must advise the taxpayer that an amended return, if needed, must be filed as a paper return and mailed to the service center that would handle the taxpayer's paper return.
.03 The Transmitter must give the taxpayer the DCN for the taxpayer's Form 8453-OL and instructions to the taxpayer for entering the DCN on Form 8453-OL.
.04 If a taxpayer inquires about the status of a refund, the Transmitter, or On-Line Service Provider if the taxpayer is a subscriber, must advise the taxpayer of the appropriate IRS TeleTax number to inquire about the status of the taxpayer's refund. The Transmitter or On-Line Service Provider should also advise the taxpayer to wait at least three weeks from the date the Service acknowledged that the electronic portion of the taxpayer's return was accepted for processing before calling the TeleTax number.
.05 The Transmitter must inform the taxpayer that the address on the electronic portion of the return, once processed, will be used to update the taxpayer's address of record. The Service uses the taxpayer's address of record for various notices that are required to be sent to a taxpayer's "last known address" under the Internal Revenue Code and for refunds of overpayments of tax (unless otherwise specifically directed by the taxpayer, such as by Direct Deposit).
.02 The Service does not guarantee a specific date by which a refund will be directly deposited into the taxpayer's financial institution account.
.03 Neither the Service nor Financial Management Service (FMS) is responsible for the misapplication of a Direct Deposit that is caused by error, negligence, or malfeasance on the part of the taxpayer, On-Line Filer, financial institution, or any of their agents.
.02 Taxpayers who file balance due returns under the Form 1040 On-Line Filing Program for any taxable year are responsible for making full and timely payment of any tax that is due. Failure to make full payment on or before the due date of the return (determined without regard to extensions) will result in the imposition of interest and may result in the imposition of penalties.
.03 Taxpayers have several options for paying balances due, including the following:
.02 An On-Line Filer must adhere to all relevant federal, state, and local consumer protection laws that relate to advertising and soliciting.
.03 An On-Line Filer must not use the Service's name, "Internal Revenue Service" or "IRS", within a firm's name.
.04 An On-Line Filer must not use improper or misleading advertising in relation to the Form 1040 On-Line Filing Program (including the time frames for refunds).
.05 An On-Line Filer using electronic filing promotional materials or logos provided by the Service must comply with all Service instructions pertaining to the promotional materials or logos.
.06 An On-Line Filer using the Direct Deposit name and logo must comply with the following:
.07 Advertising materials must not carry the FMS, IRS, or other Treasury Seals.
.08 Advertising for a cooperative electronic return filing project (public/private sector) must clearly state the names of all cooperating parties.
.09 If an On-Line Filer uses radio or television broadcasting to advertise, the broadcast must be pre-recorded. The On-Line Filer must keep a copy of the pre-recorded advertisement for a period of at least 36 months from the date of the last transmission or use.
.10 If an On-Line Filer uses direct mail or fax communications to advertise, the On-Line Filer must retain a copy of the actual mailing or fax, along with a list or other description of firms, organizations, or individuals to whom the communication was mailed, faxed, or otherwise distributed for a period of at least 36 months from the date of the last mailing, fax, or distribution.
.11 Acceptance to participate in the Form 1040 On-Line Filing Program does not imply endorsement by the Service, FMS, or the Treasury Department of the software or quality of services provided.
.02 If a Principal or Responsible Official is suspended from the Form 1040 On-Line Filing Program, every entity that listed the suspended Principal or Responsible Official on its Form 8633 may also be suspended.
.03 The Service will monitor the timely receipt of Forms 8453-OL.
.04 The Service will monitor the quality of an On-Line Filer's transmissions throughout the filing season. The Service will also monitor the electronic portion of returns and tabulate rejections, errors, and other defects. If quality deteriorates, the On-Line Filer will receive a warning from the Service.
.05 The Service will monitor complaints about an On-Line Filer and issue a warning or suspension letter as appropriate.
.06 The Service reserves the right to suspend an On-Line Filer from participation in the Form 1040 On-Line Filing Program for violating any provision of this revenue procedure. Generally, the Service will advise a suspended On-Line Filer concerning the requirements for reacceptance into the Form 1040 On-Line Filing Program. The following reasons may lead to a warning letter and/or suspension of an On-Line Filer from the Form 1040 On-Line Filing Program (this list is not all-inclusive):
.07 The Service may list in the Internal Revenue Bulletin, district office listings, district office newsletters, and on the EFS Bulletin Board the name and owner(s) of any entity suspended from the Form 1040 On-Line Filing Program and the effective date of the suspension.
.08 If a participant is suspended from participating in the Form 1040 On-Line Filing Program, the period of suspension includes the remainder of the calendar year in which the suspension occurs plus the next two calendar years. A suspended participant may submit a new application for the application period immediately preceding the end of the suspension.
.02 In response to the submission of a Form 8633, the Application Processing Center will either (1) accept an applicant into the Form 1040 On-Line Filing Program, or (2) issue a proposed letter of denial that explains to the applicant why the Application Processing Center proposes to reject the application to participate in the Form 1040 On-Line Filing Program.
.03 An applicant who receives a proposed letter of denial may mail or deliver, within 30 calendar days of the date of the proposed letter of denial, a written response to the Application Processing Center. The applicant's response must address the Application Processing Center's reason(s) for proposing the denial to participate.
.04 Upon receipt of an applicant's written response, the Application Processing Center will reconsider its proposed letter of denial. The Application Processing Center may either (1) withdraw its proposed letter of denial and accept the applicant into the Form 1040 On-Line Filing Program, or (2) finalize the proposed denial letter.
.05 If an applicant receives a final denial letter from the Application Processing Center, the applicant is entitled to an appeal, in writing, to the Director of Practice.
.06 The appeal must be mailed or delivered to the Application Processing Center within 30 calendar days of the date of the final denial letter. An applicant's written appeal must contain a detailed explanation, with supporting documentation, of why the denial should be reversed.
.07 The Application Processing Center will, upon receipt of a written appeal to the Director of Practice, forward to the Director of Practice its file on the applicant and the material described in section 13.06 of this revenue procedure. The Application Processing Center will forward these materials to the Director of Practice within 15 calendar days of receipt of the applicant's written appeal.
.08 Failure to respond within either of the 30-day periods described in sections 13.03 and 13.06 of this revenue procedure irrevocably terminates an applicant's right to an administrative review or appeal.
.09 If an application for participation in the Form 1040 On-Line Filing Program is denied, the applicant is ineligible to submit a new application for two years from the application date of the denied application.
.02 If an On-Line Filer receives a suspension letter, the On-Line Filer may mail or deliver, within 30 calendar days of the date of the suspension letter, a detailed written explanation, with supporting documentation, of why the suspension letter should be withdrawn. This written response should be sent to the district office or service center that issued the suspension letter.
.03 Upon receipt of the On-Line Filer's written response, the district office or service center will reconsider its suspension of the On-Line Filer. The district office or service center may either (1) withdraw its suspension letter, or (2) affirm the suspension.
.04 If the On-Line Filer receives a letter affirming the suspension, the On-Line Filer is entitled to an appeal, in writing, to the Director of Practice.
.05 The appeal must be mailed or delivered to the district office or service center that issued the suspension letter within 30 calendar days of the date of the letter affirming the suspension. The On-Line Filer's written appeal must contain detailed reasons, with supporting documentation, for reversal of the suspension. RRP
.06 The district office or service center whose decision to suspend is being appealed will, upon receipt of a written appeal to the Director of Practice, forward its file on the On-Line Filer to the Director of Practice. The district office or service center will also forward to the Director of Practice the material described in section 14.05 of this revenue procedure. The district office or the service center will forward these materials within 15 calendar days of the receipt of an On-Line Filer's written request for appeal.
.07 Failure to appeal within either of the 30-day periods described in sections 14.02 and 14.05 of this revenue procedure irrevocably terminates an On-Line Filer's right to an appeal.
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