Mandatory Individual e-file Frequently Asked Questions
California law requires tax practitioners who prepare more than 100 California individual income tax returns annually and prepare one or more using tax preparation software to e-file all personal income tax returns. This measure reduces tax return processing costs for the State.
Following is a list of questions and answers that may be helpful to you regarding the mandatory e-file law.
- Where can I read more about the law?
This law is detailed in the California Revenue & Taxation Code, Sections 18621.9 and 19170. You can view these online at leginfo.legislature.ca.gov.
Why is Individual e-file mandatory?
By making e-file mandatory, the cost of processing individual income tax returns is significantly reduced. During the first year of implementation, we received over 3 million additional e-file returns.
Who must e-file tax returns under this law?
Tax preparers who prepared more than 100 timely original California individual income tax returns during any calendar year beginning on and after January 1, 2003, and in the current calendar year prepare one or more acceptable individual income tax returns using tax preparation software.
What types of returns must be e-filed under mandatory individual e-file the law?
All current year individual income tax returns are required to be e-filed. Prior year, fiduciary, amended, and business type returns are not required to be e-filed under this law.
If I reside or have an office outside California,
am I still subject to the law?
Yes. If you meet the mandatory e-file requirements, all California individual returns you prepare are required to be e-filed, even if you reside or have your office outside the state.
When am I no longer subject to the law?
The law shall cease to apply if during the previous calendar year, you prepared no more than 25 original California individual income tax returns.
When did the law take effect?
The law took effect on January 1, 2004.
What if I have multiple offices that each file
less than 100 returns?
For the purposes of this law, an "Income Tax Preparer" is defined as a person who prepares, in exchange for compensation, or who employs another person to prepare, in exchange for compensation, any return for the tax imposed. This means, even if a person in your employ or one of your offices prepares less than 100 returns, if the total of all tax returns prepared from multiple offices equals more than 100 and tax preparation software is used for one or more returns, all acceptable returns prepared are required to be e-filed.
How will FTB enforce the law?
Section 19170 of the California Revenue and Taxation Code provides for FTB to assess a penalty against preparers for each return that can be e-filed that is not e-filed, unless the failure to e-file is due to reasonable cause and not willful neglect.
How much is the penalty?
The penalty is $50 per return filed on paper that should have been e-filed.
- When did the penalty take effect?
The penalty took effect January 1, 2005, and applies to all individual income tax returns required to be filed on or after that date.
- What if my client (the taxpayer) does not want their return e-filed?
Section 19170 of the Revenue and Taxation Code includes reasonable cause language that states reasonable cause includes, but is not limited to, a taxpayer's election not to e-file.
- How will I prove that returns that were not e-filed
were due to reasonable cause and not willful neglect?
You may use California's e-file Opt-Out Record for Individuals (FTB 8454) to record situations when the return cannot be e-filed due to taxpayer election or due to reasonable cause. Retain completed forms FTB 8454 in your files. Do not mail them to FTB.
- Does the FTB provide material I can give my clients to explain
the new law?
Yes. We developed a letter (FTB 1377) that you can provide your clients that discusses the law and highlights some of the many benefits of e-filing. We also translated the letter to Spanish (FTB 1377 SP).
If I use a service bureau to help me prepare/file my returns,
am I still required to e-file all of them, under the law?
Because service bureaus offer varying types of services, we will evaluate each situation separately. Please contact us at email@example.com to discuss your individual circumstances. Just a reminder: Do not include confidential taxpayer information in your email to us.
What are the requirements for participating in the California e-file
FTB no longer requires separate enrollment for Electronic Return Originators. Get more information.
What can I do if I do not receive my IRS EFIN and cannot participate
in the California e-file Program on time?
If you do not receive your IRS electronic filer identification number (EFIN) in time to start e-filing returns, we recommend you file returns on paper until you become accepted in the IRS e-file Program. Be sure to use the e-file Opt-Out Record for Individuals (FTB 8454) to record why you could not e-file these returns. As soon as you receive your IRS EFIN you must e-file all applicable returns.
What if I am denied participation in the IRS e-file Program?
We require you to be enrolled in the IRS e-file Program to participate in our e-file Program. If you have been denied participation in the IRS e-file Program, contact our e-Programs Customer Service Unit at 916.845.0353 for instructions.
I am already enrolled in the California
e-file Program. Do I need to re-enroll in the Program for
mandatory individual e-file?
No. If you are already accepted in the California e-file Program, you do not need to re-enroll for the purposes of mandatory e-file.
Will there be a waiver process allowing me to be exempt from participation
in mandatory individual e-file?
No. There is no provision in the law that allows for a preparer waiver.
I'm new to e-file. Where do I learn more about your e-file Program?
You can find information on our website or by calling our e-Programs Customer Service at 916.845.0353. You can also check with your professional organization to network with others who are participating in our e-file Program.
Where can I get software to e-file?
We provide a listing of approved e-file software developers on our Website. You can also contact our e-Programs Customer Service at 916.845.0353.
Where can I find more information about mandatory individual e-file?
You can find information on our Mandatory individual e-file web page.
Who should I contact about mandatory individual e-file?
You can email your questions to firstname.lastname@example.org.
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