e-file for Large and Mid-Size Corporations (2006) - Frequently Asked Questions
You should review these updated FAQs since many of these FAQs have been revised, updated, or deleted to reflect changes applicable to tax year 2006 returns.
New and Updated FAQs:
Index to FAQs:
A. Modernized e-file, Benefits, and Overview
B. Corporations Required to e-file
C. Communication and General e-file
D. e-file for Corporations That Use a Tax Professional to Prepare Their Income Tax Return
E. e-file for Corporations Which Prepare Their Own Returns
F. Sources for Additional Information on Large and Mid-Size Corporations e-file
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A. Modernized e-file, Description and Benefits
Q1. What is e-file for large and mid-size corporations?
A1. IRS e-file is the name for the electronic filing of tax returns. When a corporation e-files they send their income tax return data to IRS electronically instead of on paper forms. In 2004 IRS started a new e-file system for corporations, referred to as “Modernized e-file” (MeF) that is web-based, allowing electronic filing of corporate income tax returns through the Internet. MeF uses the widely accepted XML format, a standardized way of identifying, storing and transmitting data.
Certain corporations are required to e-file as explained in these FAQs. With few exceptions, all corporations that file Forms 1120 or 1120S may file electronically.
IRS e-file is available to corporations that prepare and/or transmit their own returns and to those that rely upon a tax professional to prepare and/or transmit their returns.
Corporate e-file provides additional information on the background and development of electronic filing for corporations.
Q2. What are the benefits of e-file?
A2. e-file results in benefits for both IRS and taxpayers, including:
More Explicit Error Conditions - New error code explanations pinpoint the location of the error in the return and provide complete information in the Acknowledgement File.
Faster acknowledgements - Transmissions are processed upon receipt and acknowledgments are returned in near real-time. No more waiting for once or twice daily system processing cycles.
Integrated Payment Option - Owe Taxes? - You can e-file a balance due return and, at the same time, authorize an electronic funds withdrawal from you bank account. Payments are subject to limitations of the Federal Tax Deposit Rules.
Elimination of Duplicate Submissions - When forms listed below are included as part of a Form 1120/1120S return filed electronically, the requirement to submit duplicate copies of the forms to the Philadelphia Submission Processing Center (PSPC) is eliminated.
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Form 5471---Information Return of US Persons With Respect To Certain Foreign Corporations
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Form 5472---Information Return of a 25% Foreign-Owned US Corporation or a Foreign Corporation Engaged in a US Trade or Business
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Form 5713---International Boycott Report
Q3. Are there corporations that file Forms 1120 or 1120S that can not file their tax returns electronically?
A3. The Tax Year 2006 Corporate e-file Program does not accept and process the following corporate returns. Therefore, the corporation is excluded from the electronic filing requirement under Temporary Treasury Regulation Section 301.6011-5T unless otherwise noted.
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Election to make installment payments for a portion of the total tax attributable to the Bank Holding Company Tax Act.
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Prompt Assessments
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Returns with reasonable cause as related to failing to pay and/or file timely. Note: Corporations required to e-file under Temporary Treasury Regulation Section 301.6011-5T are still required to file electronically. In order to comply with the mandatory e-file regulations, corporations must send the explanation of reasonable cause as a separate letter to Internal Revenue Service, ARKA Monterrey Park, 1973 N. Rulon White Blvd., Mail Stop 6552 (ARKA) - Attn: AM Clerical, Ogden, Utah 84404. These procedures do not apply to Form 2220 which should be filed as part of the electronic return.
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Returns with pre-computed penalty and interest other than Estimated Tax Penalty. Note: Corporations required to e-file under Temporary Treasury Regulation Section 301.6011-5T are still required to file electronically.
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Requests for overpayments to be applied to another account. Note: Corporations required to e-file under Temporary Treasury Regulation Section 301.6011-5T are still required to file electronically. In order to comply with the mandatory e-file regulations, corporations must send the request to apply overpayments as a separate letter to Internal Revenue Service, ARKA Monterrey Park, 1973 N. Rulon White Blvd., Mail Stop 6552 (ARKA) - Attn: AM Clerical, Ogden, Utah 84404.
Note: The following forms cannot be filed electronically
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1120H - Homeowners Association
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1120F - Foreign Corporations (to be implemented on MeF January 2008)
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1120FSC - Foreign Sales Corporations
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*1120L - Life Insurance Company (Top/Parent level cannot be e-filed, subsidiary level can be e-filed)
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1120RIC - Regulated Investment Companies
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1120REIT - Real Estate Investment Trust
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*1120PC - Property and Casualty (Top/Parent level cannot be e-filed, subsidiary level can be e-filed)
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1120SF - Settlement Funds
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1120ND - Nuclear Decommission Trusts
*Corporations required to e-file that file a consolidated 1120 and have 1120L or 1120PC subsidiary returns should see " Tax Year 2006 Directions to e-file" for additional information.
Q4. Does that mean a corporation can e-file a 52-53 week, short period, or final Tax Year 2006 1120/1120S income tax return?
A4. Yes, IRS has modified MeF programs so corporations can file Tax Year 2006 income tax returns for:
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52-53 week
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short period
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final returns
Q5. Can I electronically file my corporation State income tax return?
A5. The IRS has been working with the Federation of Tax Administrators (FTA) and 26 state tax agencies on a joint project to develop a new fed/state electronic filing system. In 2006, IRS implemented the new system and many states likewise expect to implement electronic tax filing programs. Check with your State tax authorities for specific information about state electronic filing options available to corporations.
B. Corporations Required to e-file
Q1. Which corporations are required to file returns electronically?
A1. Regulations issued January 11, 2005 require that certain corporations electronically file their Form 1120 or 1120S for tax periods ending on or after December 31, 2005 if they have assets of $50 million or more and file at least 250 returns, including income tax, information returns, excise tax, and employment tax returns, during a calendar year.
For tax year 2006 returns that are due in 2007, the electronic filing requirement has been expanded to include corporations with $10 million or more in total assets that file 250 or more returns a year.
Q2. How do I determine whether the corporation meets the 250-return threshold?
A2. All returns filed by a corporation or members of a controlled group of corporations during the calendar year are counted. The total is determined by aggregating all returns, regardless of type, that are required to be filed over the calendar year, including income tax returns, returns required under section 6033, information returns, excise tax returns, and employment tax returns. Corrected returns, amended returns, or forms filed with the 1120 / 1120S tax return, such as Form 5471, are not counted.
Example 1 - A corporation that files a consolidated return has 5 subsidiaries. Each subsidiary and the parent have 25 employees, one of the subsidiaries files100 Forms 1099, and another subsidiary files 3 Forms 720. The corporation filing the consolidated return is deemed to have met the 250-return threshold because:
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Each of the 150 Forms W-2 is considered a separate return.
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Each of the 6 Forms 940 are considered a separate return.
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Each of the 24 Forms 941 are considered a separate return.
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Each of the 100 Forms 1099 are considered a separate return.
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Each of the 3 Forms 720 are considered a separate return.
Example 2 – A controlled group, as defined by IRC §1563(a), has 4 members, 1 C corporation, 2 S corporations, and 1 exempt organization that files Form 990. The C corporation has 50 employees, 1 S corporation has 300 employees and the other S corporation has 200 employees, and the exempt organization has 150 employees. The aggregate number of returns filed for the controlled group is 724. The C corporation is deemed to have met the 250-return threshold because:
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Each of the 700 Forms W-2 are considered a separate return.
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Each of the 4 Forms 940 are considered a separate return.
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Each of the 16 Forms 941 are considered a separate return.
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Each of the 4 Forms 1120/1120S/990 are considered a separate return.
The S corporation with 300 employees meets the 250-return threshold. The S corporation with 200 employees and the exempt organization do not meet the 250-return threshold since the concept of aggregation does not apply to Forms 1120S and 990.
Example 3 – A controlled group as defined by IRC §1563(a) has 3 member corporations. All members file Form 1120S. Corporations A and C have 20 employees and Corporation B has 300 employees. Only Corporation B is deemed to have met the 250-return threshold since the concept of aggregation does not apply when a controlled group does not have at least 1 member who files Form 1120.
Q3. Are returns filed by a related partnership included when determining if a corporation meets the 250 return threshold?
A3. No, since a controlled group, as defined by IRC §1563(a), does not include partnerships. Returns filed by a related partnership are not included when determining if a corporation meets the 250-return threshold.
Q4. If a corporation that meets the asset and return filing thresholds files a 52-53 week return that ends on December 30, 2006 are they required to e-file their Tax Year 2006 return?
A4. Yes, for purposes of determining whether a corporation with a 52/53 week tax year must file electronically, such corporation’s tax year is deemed to end or close on the last day of the calendar month nearest to the last day of the 53-53 week tax year. For further guidance on 52-53 week tax years, see Regulations section 1.441-2(c)(1).)
Q5. Why does the IRS require the electronic filing of corporate returns filed by large and mid-size businesses?
A5. Electronic filing supports IRS’ broader goals of improving service to taxpayers, enhancing compliance, and modernizing the agency.
Implementation of this regulation is also consistent with an Office of Treasury Inspector General for Tax Administration (TIGTA) Report recommending that IRS require large corporations to file electronically.
Overall, increased electronic filing of returns has been shown to improve customer satisfaction and confidence in the filing process, and it may be more cost effective for affected entities.
Q6. Will the IRS grant waivers releasing taxpayers from the e-file requirement?
A6. Notice 2005-88 provides that taxpayers can request waivers from the electronic filing requirement where the taxpayer can not meet electronic filing requirements due to technology constraints; or where compliance with the requirements would result in undue financial burden on the taxpayer. The notice also outlines the specific steps taxpayers should follow when requesting waivers from the IRS.
Q7. What actions should a corporation take to ensure they are ready for filing an income tax return electronically in 2007?
A7. That depends on whether the corporation will use a tax professional to prepare their electronic income tax return or if the corporation plans to prepares their own electronic income tax return.
Corporations that plan to use a tax professional to prepare their electronic income tax return should check with them early and ensure they are IRS Authorized e-file Providers. Also, these corporations should review the FAQs in section D of these FAQs.
Corporations that plan to prepare their own income tax returns should discuss the various electronic filing options with their software vendor as soon as possible and may need to take steps to register and apply for electronic filing. Additional information for these taxpayers is in section E of these FAQs.
Q8. What happens if a corporate taxpayer required to e-file fails to comply?
A8. If a corporate taxpayer fails to file an income tax return on magnetic media when required to do so by regulations, the IRS may determine that the taxpayer has failed to file the return. The taxpayer then becomes subject to §6651 additions to tax, typically resulting in monetary penalties on the amount of underpayment. Additionally, any return not in compliance with the electronic filing requirement will be considered to not have been timely filed rendering any elections invalid.
For returns filed for tax year 2005, the Service contacted each taxpayer who reported assets exceeding $50M and filed a paper return. We explained the electronic filing requirements to these taxpayers and worked with them to subsequently electronically file if they were covered by the temporary regulation. The Service will continue to monitor paper filing submissions and enforce the requirements of electronically filling appropriately.
Q9. If the corporation is required to file their Form 1120 or 1120S under Temporary Treasury Regulation Section 301.6011-5T, are they also required to e-file their extension and employment tax returns?
A9. No, the requirement to e-file under Temporary Treasury Regulation Section 301.6011-5T applies only to the Form 1120 or 1120S. Forms 7004, and the 94X family are not required to be e-filed.
Q10. We officially amended our certificate of incorporation to reflect a new corporate name, and were intending to notify IRS by checking the box on the face of the tax return. Can we file the corporation’s tax return on paper because the e-file system does not accept name changes?
A10. No, in January 2007, the Modernized e-File system was enhanced to accept name change returns. Taxpayers with a name change that are otherwise required to e-file must file electronically unless they have received an approved waiver. Note: The existing name control should be used.
Q11. Prior versions of Publication 4163 and Publication 4164 indicated that Name Change Returns were excluded from electronic filing. Does that mean that a taxpayer covered by the electronic filing mandate that officially changed their name and intended to notify the IRS by checking the box on the face of the Form 1120 or 1120S return is excluded from e-filing?
A11. No, Publication 4163 dated May 1, 2007 and Publication 4164 dated 06/08/2007 have been updated to remove the exclusion. (see FAQ Q9 above)
If the taxpayer has not officially notified the IRS of the name change, (see FAQ Q13 below on correct procedures) our records would not reflect the new name and the new Name Control and the return would reject when it was electronically filed.
If the software being used requires manual input of the Name Control or allows an automatically created Name Control to be overwritten, the new corporate name may be used on line 1 but the old Name Control must be entered where applicable.
If the software being used automatically creates the name control for the taxpayer, and that name control can not be overwritten, the old corporate name should be used on line 1 (first name line) and the new name should be added on the In Care of line.
Q12. Is a taxpayer covered by the electronic filing mandate that officially changed their name and that has already notified the IRS of this change required to file electronically?
A12. Yes. Since the notification to IRS of the name change would have resulted in a new Name Control (if applicable), there will not be a problem using the new name and new Name Control. If, for some reason, the e-filed return rejected for a Name Control/ EIN mismatch, and the EIN is correct, the filer should refile the return using the old Name Control.
Q13. How do you officially change the name of a Corporation with the Internal Revenue Service?
A13. Write to IRS at the Ogden address where you would be required to file a paper return to inform us of the name change. In addition, the notification must be signed by a Corporate Officer. Articles of Amendment to the Certificate of Incorporation from the state that authorized the Corporation’s name change must be attached.
Q14. If I change the name of my corporation, do I need a new EIN?
A14. In some situations a name change may require a new Employer Identification Number (EIN) or a final return. See Publication 1635, Understanding Your EIN, to make this determination. If only the name is changing, you do not need a new EIN.
C. Communication and General e-file Instructions
Q1. Following the issuance of the temporary and proposed regulations on January 11, 2005 there was a public comment period and a public hearing. What actions has IRS taken in reaction to the issues raised by corporations required to file electronically?
A1. One of the main concerns expressed during the hearings was that IRS should solicit input from corporations directly affected by the requirements. The IRS meets with various groups, software developers and tax professionals, and is committed to help corporations prepare to electronically file their 2005 returns. IRS meets regularly with the Tax Executive Institute (TEI), Association for Computers and Taxation (ACT), and AICPA. Most of the meetings include the primary vendors used by large corporations and many of the tax professionals that are expected to prepare returns for corporations required to e-file.
Q2. Did IRS meet with directly with corporations to hear their concerns?
A2. Yes, both TEI and ACT included numerous corporations in the meetings with IRS and they were allowed to voice their concerns directly to IRS. AICPA included many of the tax professionals that are expected to prepare returns for large corporations. Many issues were identified by corporations and tax professionals during these meetings and IRS committed to address each of the issues raised. TEI established a group that included 4 large corporations that worked with IRS for several months and was actively involved in helping IRS address the issues.
Q3. What resulted from IRS meetings with affected taxpayers and stakeholder groups?
A3. IRS developed guidance for those corporations that are required to file Tax Year 2006 electronic returns. Before IRS officials approved the guidance, meetings were held with TEI, ACT, and AICPA to discuss the guidance. This guidance has now been formalized in “Tax Year 2006 Directions for Corporations Required to e-file” and will ease the transition from filing a paper return to electronic filing.
Q4. Can a corporation that voluntarily files an electronic return, use the procedures included in “Tax Year 2006 Directions for Corporations Required to e-file”?
A4. No, “ Tax Year 2006 Directions for Corporations Required to e-file” only applies to corporations required to e-file.
Q5. If a corporation who is required to e-file uses the procedures provided by IRS in “Tax Year 2006 Directions for Corporations Required to e-file,” is there a need to also file a waiver notifying IRS?
A5. No, if a corporation who is required to e-file follows the procedures exactly as provided by IRS in “Tax Year 2006 Directions for Corporation Required to e-file” there is no need to file a waiver.
Q6. Does a corporation need special software to file an electronic income tax return?
A6. The answer depends on if the corporation uses a tax professional to prepare their income tax return or if the corporation prepares their own income tax return.
If the corporation uses a tax professional to prepare the income tax return, it does not need special software to file electronically. The corporation’s tax professional will need to use software approved for electronic filing and also be an IRS Authorized e-file Provider. Taxpayers should check with their tax preparer early to ensure they are ready to file their electronic income tax return. These taxpayers should also review section D of these FAQs.
Corporations that purchase tax preparation software and prepare their own income tax return should discuss the various electronic filing options with their software vendor as soon as possible, and review the additional information in section E of these FAQs.
Q7. My corporation uses tax preparation software to prepare our income tax return in-house, but after the return is complete, we contract with a tax professional to review and sign the return as paid preparer. Does my corporation need special software or will my tax professional be able to file the electronic return for me?
A7. You should discuss the preparation of your electronic return with the tax professional you plan to sign the return as paid preparer. If they are an IRS Authorized e-file Provider and use the same software used by your corporation to prepare the return, they may be able to “originate” your electronic return. If the tax professional uses a different software package, you will need to follow the procedures in IRS e-file for Large Taxpayers Filing their Own Corporate Income Tax Return, Rev. 02/2006 (pdf) to “originate” your electronic return.
Q8. What if a corporation prepares the income tax return “in-house” but does not use tax preparation software?
A8. You will be required to either purchase software approved for electronic filing, develop your own software, or use an IRS Authorized e-file Provider to prepare your electronic return. If you choose to develop your own software you should review Publication 4164. Additionally, the software must be approved by the IRS before it can be used to file an electronic return.
Q9. Corporations that choose to develop their own tax preparation software must have the software approved by IRS. Does this requirement apply to corporations that use software approved for electronic filing for a portion of their return but develop their own software to prepare other portions of the income tax return?
A9. Yes, this requirement also applies to corporations that choose to develop their own software for portions of the return. You should review Publication 4164 for additional information.
Q10. My corporation prepares our income tax return using separate tax preparation software, one for the domestic portion of the return and another for International forms (i.e. Form 5471). Assuming both have been approved for electronic filing, am I still required to transmit the entire electronic income tax return to IRS in one file?
A10. Yes, MeF can only process electronic income tax returns if the entire return is transmitted to IRS in one file. Software vendors are working on tools to “aggregate or merge” files as outlined in your example. You should discuss your situation with both of your software vendors.
Q11. Do software vendors have sufficient time to develop or modify their tax preparation software products so the corporations can comply with electronic filing requirements for Tax Year 2006?
A11. The primary software vendors that serve the corporate market worked closely with IRS for several years on the design and development of the new MeF system. Additionally, tax year 2005 electronic filing has provided valuable experience to the software community. Most of these software vendors have already made the necessary changes and enhancements to their tax preparation software to support the electronic filing. Other vendors are still developing or refining their products and plan to be approved by IRS in time to electronically file returns are due in 2007. Check with your software vendor or visit IRS e-file for Business Providers for a list of software vendors approved for IRS corporate e-file.
Q12. IRS does not review tax preparation software used strictly for preparing paper tax returns so why does IRS review and approve all tax preparation software used for preparing electronic returns?
A12. IRS established a rigorous approval process that tax preparation software used for preparing electronic returns must pass before software vendors are allowed to market their products as “approved for e-file”. This process ensures that software approved for electronic filing can accurately format income tax return data into XML format and transmit the return data to IRS. An overview of IRS software testing process contains more information on the testing and approval process.
Q13. What testing does IRS perform on MeF systems before they are used to process electronic income tax return?
A13. IRS systems must also be approved before they can be used to process electronic returns. Software vendors, third party transmitters, and IRS all have processes in place to ensure the accuracy of data that is passed electronically between systems. An overview of IRS system testing process contains more information on this system testing process.
Q14. When an electronic return is “originated” by approved tax preparation software, the corporation’s tax return data is converted into an XML format for electronic filing. How can the corporation be sure that data on the return reviewed and signed by the Corporate Officer is exactly the same as the data transmitted to IRS after the return formatted in XML?
A14. MeF requires tax preparation software to create a “Hash” or “Check Sum” which counts each byte of electronic tax return data and includes this total in the transmission file sent to IRS. When IRS receives the transmission file, one of the first steps of processing the electronic return is to count the bytes received. The Acknowledgment File will contain the incoming hash and the IRS computed hash along with the Taxable Income and Total Tax.
IRS will also make the XML stylesheets used by MeF processing available on IRS.gov so software vendors or corporations may incorporate them into their programs which will allow users to view the return information.
Q15. What precautions has IRS taken to ensure a corporation’s tax return data is secure during transmission to IRS?
A15. The Internal Revenue Service is bound by law to protect the confidentiality of tax return information and meeting that responsibility takes the highest priority at the agency. All information transmitted through IRS e-file is secured through use of multiple security mechanisms and personnel, operating under strict federal guidelines, which carefully protect the information. IRS e-file systems employ a variety of security features, which are closely monitored to prevent unauthorized or inappropriate access. IRS cannot discuss specifics about MeF processing because freely disseminating that information could jeopardize the security we intend to provide. IRS has also developed a more detailed technical overview outlining certain MeF security standards.
Q16. How will my corporation know IRS received and processed my electronic income tax return?
A16. A general overview of how IRS communicates with transmitters during the electronic filing process is available to assist corporations. Specific information will vary depending on if your corporation uses a third party transmitter or chooses to transmit their own electronic income tax return.
Corporations that use a third party transmitter to transmit their electronic income tax return to IRS will receive information from the third party transmitter instead of IRS so you should discuss types of communication and timeframes with them.
IRS will communicate directly with corporations that choose to transmit their own electronic income tax return. If your corporation is considering transmitting their own return you should discuss options with your software vendor as soon as possible and see additional information in section E below.
Q17. Can the Modernized e-file system process very large income tax returns filed by a consolidated corporation?
A17. Yes, IRS worked with software vendors, tax professionals and corporations that file the largest returns, for several years during the development of MeF. IRS has also done extensive research in preparation for MeF performance testing to determine the size of all types of corporate returns.
Q18. What has IRS done to make sure they can process electronic income tax returns for large corporations?
A18. IRS has conducted numerous MeF performance tests which included models of income tax returns similar to returns filed by small, mid-size, large, and extremely large corporations. The model consisted of a 50,000 page return with 1,800 subsidiaries, 2,000 foreign entities, and 1,500 instances of supporting data which was processed along with other size returns. These tests were jointly conducted by IRS and the MeF application and infrastructure contractors.
Q19. Does IRS realize most large corporations file an extension, and file their return on September 15th? Will IRS be ready if all of the corporations required to e-file continue to file on September 15th?
A19. Yes. IRS projects that 5% of the corporations required to file electronic returns will transmit on the March 15th due date and the remaining 95% on the extended due date of September 15th. The necessary equipment to handle the expected September 15th volume will be installed and tested before these dates.
Q20. My corporation prepares and submits more than one tax return prior to the due date, including extensions, of the return. These subsequent filings are commonly referred to “Superseding” returns. Will my corporation be able to file more than one electronic return for the same tax period?
A20. Yes, Since January 8, 2007, MeF can process multiple electronic income tax returns for the same tax period. A taxpayer filing a superseding return must indicate the return is such by selecting the Superseded Return checkbox designation in the software.
Q21. Regarding pensions, do I have to make the contributions to my pension plan before I can file the tax return that claims the deduction for the contributions?
A21. Under Code Section 404(a)(6), if the taxpayer files before the due date of the return (with extensions), so long as the deduction is on the return, the taxpayer has until the due date to make the contribution. The actual cite is:
Code Sec. 404. Deduction for contributions of an employer to an employees' trust or annuity plan and compensation under a deferred-payment plan.
(a) GENERAL RULE
(6) TIME WHEN CONTRIBUTIONS DEEMED MADE
For purposes of paragraphs (1), (2), and (3), a taxpayer shall be
deemed to have made a payment on the last day of the preceding
taxable year if the payment is on account of such taxable year and is
made not later than the time prescribed by law for filing the return
for such taxable year (including extensions thereof).
Q22. Regarding rejected electronic returns, if a timely filed electronic return is rejected and, after contact with the IRS e-Help desk, it is ultimately determined that the return must be submitted in paper, how long does the taxpayer have to submit the paper to the appropriate submission processing center to have the return still be considered timely?
A22. If a timely filed electronic return is rejected and the reason(s) for the rejection cannot be corrected to comply with electronic filing requirements, then the taxpayer must file a paper return. To be considered timely filed this paper return must be postmarked by the later of the due date of the return (including extensions) or 10 calendar days after the date the Service last gives notification that the return was rejected. The paper return should include an explanation of why the paper return is being filed after the due date, and include a copy of the reject notification, the eCase number assigned by the IRS e-Help desk, and a brief history of actions taken to correct the electronic return.
The information published in Notice 2005 – 88 incorrectly states that in order for the paper return to be considered timely, it must be filed by the later of the due date, or 5 calendar days after the date the Service last gives notification to the taxpayer that the return has been rejected, as long as the first transmission was made on or before the due date of the return (including extensions). 5 calendar days is incorrect – the correct number is 10 calendar days.
Q23. How does a corporation amend an e-filed tax return?
A23. Amended returns filed prior to January 8, 2007 will need to be filed following the existing paper process. Beginning January 8, 2007, taxpayers may use Modernized e-File (MeF) to amend returns for tax years ending on or after December 31, 2005. You should check with your software vendor to determine the tax periods that they support electronic amended return filing. Additional information on electronic amended return filing can be found on the IRS.gov website.
*Note: Carryback Claims, situations in which the change is due to a net operating loss carryback, a capital loss carryback, or a general business credit carryback, are exempt from the e-file requirement and should be filed using the existing paper process.
Q24. How can a corporation submit omitted documents after the return has been e-filed?
A24. Once a tax return has been e-filed it is considered the return of record, and documents that were not attached when the return was e-filed can not be considered as part of the return. There is no process to associate forgotten or missed documents with an electronic return. If a taxpayer feels that the missed or forgotten items are material enough to warrant sending to the IRS, then an amended return should be filed.
Amended returns filed prior to January 8, 2007 will need to be filed following the existing paper process. Beginning January 8, 2007, taxpayers may use Modernized e-File (MeF) to amend returns for tax years ending on or after December 31, 2005.
Q25. I used Form 8453-T to submit some forms that I erroneously forgot to include a part of my e-filed return. I mailed this information to:
Internal Revenue Service
PO Box 3205, Mail Stop 3205
Ogden, UT 84409
Why did the post office return this information to me?
A25. IRS no longer accepts forgotten or omitted items associated with e-filed returns. The post office box has been closed and all information is “Returned to Sender.” If you have forgotten or omitted items, you should refer to FAQ 24 above. Form 8453-T is now obsolete.
Q26. I e-filed my international forms 5471, 5472, and 5713. Is there still a requirement to send a duplicate copy of these forms?
A26. No, you no longer need to send a duplicate paper copy of Forms 5471, 5472, and 5713 if you electronically file the original form.
Q27. My corporate return is subject to a penalty other than estimated tax penalty. We would like to pre-compute the penalty and interest and submit it when we electronically file our return. How do we include pre-computed penalty and interest with our return?
A27. There is no way to include pre-computed penalty and interest on an electronically filed return. After the return is filed, IRS will compute the penalty and interest and notify you of the amount. Previously, guidance posted on this website stated:
Returns with pre-computed penalty and interest. Note: Corporations required to e-file under Temporary Treasury Regulation Section 301.6011-5T are still required to file electronically. In order to comply with the mandatory e-file regulations, corporations must send the explanation of pre-computed penalty and interest as a separate letter to Internal Revenue Service, ARKA Monterrey Park, 1973 N. Rulon White Blvd., Mail Stop 6552 (ARKA) - Attn: AM Clerical, Ogden, Utah 84404.
This guidance is NO longer applicable.
If you are subject to an estimated tax penalty, you should complete Form 2220 in XML, attach the form to you electronic Form 1120, and include the amount on Form 1120, Line 33.
D. e-file for Corporations That Use a Tax Professional to Prepare Their Income Tax Return
Q1. If a corporation uses a tax professional to prepare the income tax return, what extra steps are required in order to comply with the requirements to file an electronic return?
A1. If your corporation uses a tax professional to prepare the entire income tax return there should be minimal impact. You should check with your tax professional to ensure they are an IRS Authorized e-file Provider and discuss their responsibilities to “originate” your electronic return. You should also ensure that your tax professional uses software that fully supports your e-file requirements. Your Corporate Officer will also sign the electronic return using a Form 8453-C or Form 8879.
If your corporation uses a tax professional to prepare only a portion of the income tax return but the corporation also uses other formats (Word, Excel etc) to add other information (i.e. elections, other forms) before the paper return is mailed to IRS, your internal process may change. IRS requires the entire electronic return to be sent to IRS in one electronic file. You should discuss the preparation of your electronic return with your tax professional and they should be able to assist you.
Q2. What is my responsibility if my tax professional uses e-filing software that does not fully support my e-filing requirements? For example, my corporation files a consolidated tax return and the software that my tax professional uses does not support consolidated tax returns.
A2. The requirement for certain large corporations to e-file is the responsibility of the corporation. Within this requirement is your need to use software that complies with IRS published guidance. This guidance permits some specific latitude for different types of very specific filing situations. Your return needs to be prepared and filed using approved software that fully supports your specific filing situation consistent with this published guidance.
E. e-file for Corporations that Prepare Their Own Income Tax Return
Q1. If a corporation required to e-file prepares its own return, what extra steps are required in order to comply with the requirements to file an electronic return?
A1. First your corporation should be aware of the issues discussed in section C of these FAQs, “Communication and General e-file”, and then determine if you meet the IRS definition of “Large Taxpayer”.
Q2. What is the IRS’s definition of a “Large Taxpayer”?
A2. For purposes of electronic filing, the IRS defines a “Large Taxpayer” as a business or other entity with assets of $10 million or more, or a partnership with more than 100 partners, which originates the electronic submission of its own return(s).
Q3. How does a Large Taxpayer “originate” the electronic submission of its own returns(s)?
A3. After a Large Taxpayer completes the preparation and signs their corporate income tax return, tax preparation software approved for electronic filing will provide the necessary instructions to “originate” the electronic submission of the return and authorize the filing of the return via IRS e-file. During this process the electronic return data is converted into the format defined by IRS for electronic filing.
According to Publication 3112 (pdf), Application and Participation in IRS e-file, the taxpayer originates the electronic submission of a return by:
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Electronically sending the return to a transmitter who will transmit the return to the IRS;
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Directly transmitting the return to the IRS; or
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Providing a return to an Intermediate Service Provider for processing prior to transmission to the IRS.
Q4. Are Corporate Officers or Principals of the Firm required to complete the registration and application process required for “Large Taxpayers” to participate IRS e-file?
A4. No. Corporations meeting the definition of Large Taxpayer may assign a “Responsible Official” who will complete the online registration and application process. The Responsible Official is not required to be a Corporate Officer or a Principal of the Firm. IRS recommends that corporations have 2 or more “Responsible Officials” listed on their e-file Application in the event that the “Responsible Official” is unavailable and IRS needs to contact them regarding the corporation’s tax return.
back to the topQ5. If a corporation meets the definition of “Large Taxpayer” will IRS perform the suitability checks discussed in Publication 3112 (pdf)?
A5. No, these suitability checks are not performed on corporations meeting the definition of Large Taxpayer, or the Responsible Official, Delegated Official, Corporate Officer, or Principals of the Firm since they are required to e-file their return and do not prepare returns for profit. IRS only performs the suitability checks discussed in Publication 3112 on applicants that prepare returns for profit.
Q6. How does a corporation submit the attachments, explanations, etc. required by the Form 1120/1120S instructions and the additional information required by IRS regulations?
A6. In all situations where you are asked to provide supporting data, explanation, or a description, the software should prompt you for the necessary information and automatically create the proper “supporting data”. This is referred to as a “structured” attachment. In situations where the data cannot be entered into the software (such as an appraiser statement) you will be allowed to scan the documents and send a PDF file attached to the electronic return. In addition, the Form 1120/1120S software includes a General Explanation that may be used to send other information. Additional information can be found in Tax Year 2006 Directions for Corporations Required to e-file.
Q7. How does a Corporate Officer “sign” an electronic return that they are transmitting directly to the IRS?
A7. Large Taxpayers must use a Form 8453 signature document. After the Form 8453 is signed by the corporate officer, the form must be scanned and saved in PDF format. The file is then attached to the electronic file.
Q8. What additional information is available for “large” corporations – those that prepare their own returns?
A8. IRS has a web-based guide for corporations that meet the definition of Large Taxpayer titled IRS e-file for Large Taxpayers Filing Their Own Corporate Income Tax Return, Rev. 02/2006 (pdf). This document is currently available in draft and will be updated as necessary.
back to the topQ9. Our corporation has many subsidiaries that file as part of our consolidated return, but we also have non-consolidated subsidiaries, brother/sister, and other business related corporations for whom we prepare and file returns. Do I need a different EFIN and/or ETIN for those corporations or can I use the one I received for our corporation?
A9. You may e-file the returns for all corporations who fall within your “business” controlled group. The EFIN and ETIN are IRS’ approval for you to e-file (EFIN) and transmit (ETIN) returns and that includes “sister”, “brother”, or “related” corporations for whom you would normally prepare and submit returns as part of your business processes.
Q10. I registered for e-Services and confirmed my registration. After I created the e-file Application for my corporation, I received a “Username” and “Personal Identification Number (PIN)” in the mail. Do I need this to e-file my return?
A10. No, the system automatically generates a Username and PIN for submitting returns through the Electronic Management System (EMS). IRS did not have sufficient time to change the e-file Application and thus the EMS Username and Password are automatically sent.
Large corporations are advised to select “Internet Filing” as a transmission type on their e-file Application, which designates their returns to come to IRS through the Modernized e-File (MeF) Internet system (vs. the EMS system). To transmit your return directly to IRS, (not through another party that will then act as the transmitter) the person in your organization designated as the Internet Transmitter will use the Username and Password he/she created when they registered with e-Services to send the return. If you are using another party (such as the software vendor) to transmit your return to the IRS, they may require a similar but separate process to authenticate your transmission to them.
back to the topF. Sources for Additional Information on Large and Mid-Size Business e-file
Q1. Will the IRS provide additional information and respond to questions concerning the new e-file requirements?
A1. Yes. The IRS updates this e-file for Large and Mid-Size Corporations web page with new information as it becomes available. Check back regularly for updates.
IRS also provides e-mail addresses where interested parties can submit questions concerning corporate e-file requirements.
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Corporate taxpayers (Forms 1120, 1120S) may email questions about e-file to: largecorporate@irs.gov. Note: This email service is for e-file related questions only, not account or tax law questions.
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Taxpayers with account or tax law questions may call 1-800-829-4933.
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Tax practitioners with account or tax law questions may call 1-800-829-8374.
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Software developers and vendors may email questions about corporate e-file to: 1120@irs.gov
While individual responses may not be possible due to the volume of questions submitted, IRS will post answers to frequently-asked e-file questions on this web site.
Q2. How will IRS communicate more information about the new e-file requirements with external audiences and stakeholder groups?
A2. Since the e-file requirements were issued IRS officials have been holding regular meetings with representatives from key external stakeholder groups (TEI, ACT, and ACIPA) to discuss e-file requirements and administrative processes. These meetings will continue.
Interested parties may also subscribe to e-file News for Large and Mid-Size Corporations to receive email alerts to new e-file developments affecting large and mid-size corporations.
Q3. What additional information is available for “large” corporations – those that prepare their own returns?
A3. IRS has a web-based guide for corporations that meet the definition of Large Taxpayer titled “ IRS e-file for Large Taxpayers Filing Their Own Corporate Income Tax Return, Rev. 02/2006” (pdf). This document is currently available in draft and will be updated as necessary.
Q4. If a Large Taxpayer and has questions about electronic filing during the actual return preparation process what other resources are available?
A4. The best source of information during actual return preparation will be your software vendor. "IRS e-file for Large Filing Their Own Corporate Income Tax Return, Rev. 02/2006" (pdf) is a also a good source of information. The IRS e-Help Desk at 1-866-255-0654 can answer basic questions about electronic filing but cannot assist with return preparation.
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