Starting Your Tax Preparation Business: Everything You Need to Know About EFN

📝EFN stands for Electronic Filing Identification Number and is essential for tax preparation businesses to e-file tax returns using the IRS e-file system.

💡Having an EFN increases productivity and improves client service by using the faster and more accurate e-file system.

📚Distinguish between EFN, PTIN, and EIN: EFN helps your business file taxes electronically, PTIN is a preparer tax identification number, and EIN is an employer identification number to register your business.

🔒The IRS requires an EFN if you prepare more than 10 tax returns in a year and to purchase professional tax software.

⏰Applying for an EFN involves creating an eServices account, submitting an online application, providing personal information, fingerprinting, and passing a suitability test.

What is the difference between EFN, PTIN, and EIN?

—EFN is for electronic filing, PTIN is for tax preparers, and EIN is for business identification. Each serves a different purpose in the tax preparation process.

Why do I need an EFN for my tax preparation business?

—An EFN is required to e-file tax returns using the IRS e-file system. It increases productivity and improves client service by using a faster and more accurate method.

How do I apply for an EFN?

—You can apply for an EFN online through the IRS eServices website. The three-step process involves creating an account, completing the application, and passing a suitability test.

What is the suitability test for an EFN?

—The suitability test is conducted by the IRS to ensure that the tax preparation business and its principals and officers comply with tax laws and have a good reputation.

How long does it take to get an EFN?

—The IRS typically takes about 45 days to process an EFN application. It is recommended to apply in October of the previous year to ensure you have the EFN in time for the next tax season.

00:20EFN stands for Electronic Filing Identification Number and is essential for tax preparation businesses to e-file tax returns using the IRS e-file system.

01:18Having an EFN increases productivity and improves client service by using the faster and more accurate e-file system.

01:09Distinguish between EFN, PTIN, and EIN: EFN helps your business file taxes electronically, PTIN is a preparer tax identification number, and EIN is an employer identification number to register your business.

01:29The IRS requires an EFN if you prepare more than 10 tax returns in a year and to purchase professional tax software.

02:05Applying for an EFN involves creating an eServices account, submitting an online application, providing personal information, fingerprinting, and passing a suitability test.