e‑file Provider (Provider) to transmit the
electronic return to the IRS.
A Provider,
including an ERO, may disclose tax return information to other Providers in
connection with e-filing a tax return under Treas. Reg. §301.7216-2(d)(1).
For example, an ERO may pass on return information to an Intermediate
Service Provider or a Transmitter for the purpose of having an electronic
return formatted or transmitted to the IRS.
An ERO that chooses to originate returns that it
has not prepared, but only collected, becomes an income tax return preparer
of the returns when, as a result of entering the data, it discovers errors
that require substantive changes and then makes the changes. A
non-substantive change is a correction limited to a transposition error,
misplaced entry, spelling error or arithmetic correction. The IRS considers
all other changes substantive, and the ERO becomes a tax return preparer. As
such, the ERO may be required to sign the tax return as the tax return
preparer.
While all Providers must be on the lookout for
fraud and abuse in IRS e-file, EROs must be particularly diligent while
acting in their capacity as the first contact with taxpayers filing a
return. An ERO must be diligent in recognizing fraud and abuse, reporting it
to the IRS and preventing it when possible. Providers must cooperate with
the IRS' investigations by making available to the IRS
upon request, information and documents related to returns with potential
fraud or abuse. EROs can find additional information in the article
Reporting Fraud and Abuse Within the IRS e-file Program.
Indicators of abusive or fraudulent returns may be
unsatisfactory responses to filing status questions, multiple returns with
the same address, and missing or incomplete Schedules A and C income and
expense documentation. A "fraudulent return" is a return in which the
individual is attempting to file using someone else’s name or SSN on the
return or the taxpayer is presenting documents or information that have no
basis in fact. A potentially abusive return is a return that the taxpayer is
required to file but contains inaccurate information that may lead to an
understatement of a liability or the overstatement of a credit resulting in
a refund to which the taxpayer may not be entitled.
An ERO that is also the paid preparer should
exercise due diligence in the preparation of returns involving the Earned
Income Tax Credit (EITC), as it is a popular target for fraud and abuse.
Section 6695(g) of the Internal Revenue Code requires paid preparers to
exercise due diligence in the preparation of returns involving EITC. Paid
preparers must complete all required worksheets and meet all record keeping
requirements.
To safeguard IRS e-file from fraud and abuse, an
ERO should confirm identities and TINs of taxpayers, spouses and dependents
listed on returns prepared by its firm. TINs include SSNs, EINs, Adopted
Taxpayer Identification Numbers (ATINs) and Individual Taxpayer
Identification Numbers (ITINs). To prevent filing returns with stolen
identities, an ERO should ask taxpayers not known to them to provide two
forms of identification (picture IDs are preferable) that include the
taxpayer’s name and current address. Also, seeing Social Security cards,
ITIN letters and other documents avoids including incorrect TINs for
taxpayers, spouses and dependents on returns. Providers should take care to
ensure that they transcribe all TINs correctly.
