What is an EFIN and why you need it?

In the world of tax preparation, efficiency, accuracy and security are essential one’s success. One important tool that combines all these elements is the Electronic Filing Identification Number (EFIN). Behind getting ones PTIN, the EFIN is your second key to efficient and secure tax return filing.  In this blog post, we will explore what an EFIN is, why you need it, how to obtain it, and the advantages it brings to your tax preparation business.

What is an EFIN?

The Electronic Filing Identification Number, or EFIN, serves as your firm’s (or individual’s) official identification when it comes to electronic filing with the IRS. This number is not just a formality; it’s a federal requirement for anyone looking to file tax returns electronically.  Without it, you’d have to mail all your returns to the IRS and state for processing.  Yet from experience, we can tell you that is NOT the way that you want to file returns unless you ABSOLUTELY have to.

Why You Need an EFIN

If you plan to file tax returns electronically, an EFIN is essential.  The IRS mandates it for anyone submitting 10 or more returns electronically during a tax year.  Furthermore, e-filing offers several benefits:

1. Speed and Efficiency: E-filing is faster and easier, providing customers with quicker refunds compared to traditional paper filing, which can take up to six weeks.  Plus, e-filed returns bypass part of the IRS’ pipeline process.  If you are curious about how that process works, then check out this video on the IRS’s website.  And YES, this is still how they do it, even though the video looks like it’s from 1995!
2. Accuracy: E-filing reduces the chances of errors in tax returns, ensuring clients’ financial information is correct.
3. Future-Proofing: As technology evolves, e-filing will become more common and user-friendly, making it a smart investment for the future.  According to the IRS’s most recent data book, nearly 213.4 million returns and other forms were filed electronically. These represented close to 81.2 percent of all filings. For individual tax returns, 93.8 percent were filed electronically.

Obtaining Your EFIN

Obtaining your EFIN is a crucial step, and the good news is that it’s entirely easy and free. However, the application process can take up to 45 days, so make sure you start it ASAP if you’re looking to file during the 2024 tax filing season.

Step 1: E-file Application

To acquire your EFIN, start by completing the e-file application through the IRS. This application will request various information, including details about your firm, information about each principal and responsible official at your firm, and your chosen e-file provider type (e.g., Electronic Return Originator or ERO).

Step 2: Licensing Requirements

If your firm has a principal or responsible official who is already licensed as an attorney, CPA, or enrolled agent, you’ll need to provide this information in the application. If not, they will need to undergo fingerprinting by Fieldprint®.
Step 3: Fingerprinting Process

Setting up an appointment for fingerprinting can be done once your application is complete. Access the e-file Application summary, and follow the link under the “Terms of Agreement Signature(s) & Personal Information” section. Fieldprint® has numerous locations across the nation, making it accessible to all applicants.

Step 4: Suitability Check

Once you’ve submitted your application and required information, the IRS will conduct a suitability check. This check may include a credit check, a criminal background check, a review of prior non-compliance with e-filing requirements, and a tax compliance check.

If you want all the juicy details on the EFIN process straight from the horse’s….ahem, IRS’s mouth, then make sure you check out IRS Publication 3112, IRS e-file Application and Participation. 

Protecting Your EFIN

Securing your EFIN is of utmost importance, as identity thieves may target tax preparers to gain access to clients’ sensitive information. Here are some essential steps to safeguard your EFIN:

1. Strong Passwords: Use strong, regularly updated passwords for your e-Service accounts.
2. Security Software: Install antimalware and antivirus software to protect your systems and EFIN.
3. Physical Security: Store physical copies of your EFIN in a secure location, away from prying eyes.
4. Limited Sharing: Only share your EFIN with trusted employees or personnel.

Nonetheless, obtaining an EFIN is a pivotal step in the tax preparation process. The advantages of e-filing, combined with its cost-free nature, make it a no-brainer for tax professionals. By embracing this technology, you not only enhance the professionalism of your firm but also provide your clients with a faster and more accurate tax-filing experience. As the world of taxation evolves, the EFIN is your ticket to staying ahead in the game.