IRS PROVIDES RULES FOR ELECTRONIC FILERS.

Rev. Proc. 95-49

                             CONTENTS

This revenue procedure informs those who participate in the 1996 Electronic Filing Program for Form 1040 and Form 1040A, U.S. Individual Income Tax Return, and Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, of their obligations to the Internal Revenue Service, taxpayers, and other participants. This revenue procedure updates Rev. Proc. 94-63, 1994-2 C.B. 785.

SECTION. 2. BACKGROUND AND CHANGES

.01 Section 1.6012-5 of the Income Tax Regulations provides that the Commissioner may authorize the use, at the option of a person required to make a return, of a composite return in lieu of any form specified in 26 CFR Part 1 (Income Tax), subject to the conditions, limitations, and special rules governing the preparation, execution, filing, and correction thereof as the Commissioner may deem appropriate.

.02 For purposes of this revenue procedure, an electronically filed Form 1040, Form 1040A, or Form 1040EZ is a composite return consisting of electronically transmitted data and certain paper documents. The nonelectronic portion of the return consists of Form 8453, U.S. Individual Income Tax Declaration for Electronic Filing, and other paper documents that cannot be electronically transmitted. Form 8453 must be received by the Service before any electronically filed return is complete. An electronically filed return must contain the same information that a return filed completely on paper contains. See section 7 for procedures for completing Form 8453.

.03 The Service will periodically issue a publication that lists the forms and schedules associated with a Form 1040 that can be electronically transmitted.

.04 A Form 1040, a Form 1040A, or a Form 1040EZ cannot be electronically filed after October 15, 1996, notwithstanding the fact that the taxpayer has been granted an extension to file a return beyond that date.

.05 An amended tax return cannot be electronically filed. A taxpayer must file an amended tax return on paper in accordance with the instructions for Form 1040X, Amended U.S. Individual Income Tax Return.

.06 A tax return that has a foreign address for the taxpayer cannot be electronically filed. Army/Air Force (APO) and Fleet (FPO) post offices are not considered foreign addresses.

.07 A tax return for a decedent cannot be electronically filed. The decedent's spouse or personal representative must file a paper tax return for the decedent.

.08 This revenue procedure updates Rev. Proc. 94-63, which applied to the Electronic Filing Program for the 1995 filing season. The updates include changes in the Electronic Filing Program for the 1996 filing season, clarifications of prior Electronic Filing Program statements, and additional guidance derived from other Service documents that relate to the Electronic Filing Program. Some of the updates are:

(1) an ERO must not have a foreign address (section 4.02);

(2) additions to the reasons to submit a revised Form 8633 (section 4.04);

(3) certain officers of publicly held corporations and bank officials may not need to submit fingerprints with their applications (section 4.10);

(4) an ERO or a Service Bureau must input each taxpayer address that appears on wage and tax documentation if the address differs from the taxpayer's address on Form 1040 (section 5.04);

(5) an Electronic Filer must tell the Service when it stops electronic filing (section 5.07);

(6) modifications to the procedures for completing Form 8453 when a paid preparer prepared the return (section 5.11);

(7) an ERO must ensure against the unauthorized use of its CPIN(s) (section 5.12);

(8) additions to the list of wage and tax documentation that are required before February 15, 1996 (section 5.13);

(9) within 24 hours of receiving an acknowledgement that a return has been rejected, an ERO must notify the taxpayer that the Service has rejected the return (section 5.14);

(10) a Service Bureau must ensure against the unauthorized use of its SBIN(s) (section 5.16(10));

(11) additional restrictions on addresses that may be used on Form 8453 and in the electronic portion of the return (section 7.01(3));

(12) an ERO's obligation to provide a taxpayer with a copy of the taxpayer's return is clarified (section 8.01);

(13) taxpayer inquiries regarding the status of returns should be referred to the local district office Tele-Tax number (section 8.05);

(14) Electronic Filers must adhere to all relevant federal, state, and local consumer protection laws that relate to advertising and soliciting (section 12.02);

(15) the effect of suspending a "Principal" or "Responsible Official" on entities that listed the "Principal" or "Responsible Official" on their Forms 8633 (section 13.02);

(16) clarification of the two-year period for denial or suspension (section 13.10);

(17) modifications to the administrative review processes for denials and suspensions (sections 14 and 15); and

(18) modifications to the VITA and TCE programs (section 16).

SECTION 3. ELECTRONIC FILING PARTICIPANTS -- DEFINITIONS

.01 After acceptance into the Electronic Filing Program, as described in section 4, a participant is referred to as an "Electronic Filer."

.02 An Electronic Filer is categorized as follows:

(1) ELECTRONIC RETURN ORIGINATOR. An "Electronic Return Originator" (ERO) is either: (a) an "Electronic Return Preparer" who prepares tax returns, including Forms 8453, for taxpayers who intend to have their returns electronically filed; or (b) an "Electronic Return Collector" who accepts completed tax returns, including Forms 8453, from taxpayers who intend to have their returns electronically filed.

(2) SERVICE BUREAU. A "Service Bureau" receives tax return information on any media from an ERO, formats the return information, and either forwards the return information to a Transmitter or sends back the return information to the ERO. A Service Bureau may or may not process Forms 8453 and send them to the appropriate service center. A Service Bureau does not transmit returns directly to the Service.

(3) SOFTWARE DEVELOPER. A "Software Developer" develops software for the purposes of (a) formatting returns according to the Service's electronic return specifications; and/or (b) transmitting electronic returns directly to the Service. A Software Developer may also sell its software.

(4) TRANSMITTER. A "Transmitter" transmits the electronic portion of a return directly to the IRS Data Communications Subsystem. An entity that provides a "bump-up" service is a Transmitter. A "bump-up" service provider increases the transmission rate or line speed of formatted or reformatted information that is being sent to the Service via a public switched telephone network. For example, a bump-up service provider may increase the transmission rate or line speed of information from 4800 bits per second (BPS) to 9600 BPS. Service specifications for electronic filing require an asynchronous speed of 300 BPS to 19,200 BPS or a bisynchronous speed of 4800 BPS to 19,200 BPS.

.03 The Electronic Filer categories are not mutually exclusive. For example, an ERO can, at the same time, be considered a Transmitter, Software Developer, or Service Bureau depending on the function(s) performed.

.04 An electronic filing controlled office: (1) is an office in which an Electronic Filer has an ownership interest; (2) uses hardware, software, and transmission services supplied by an Electronic Filer; (3) receives income tax returns for electronic filing; and (4) has direct contact with taxpayers. At a minimum, direct contact includes verifying dollar amounts, routing transit numbers, and depositor account numbers on Forms 8453. A controlled office may or may not be open all year.

.05 An Electronic Filer may have a drop-off collection point(s). The activity at a drop-off collection point is limited solely to receiving a return that a taxpayer wants to have electronically filed and collecting a fee for electronically filing that return. Although the Electronic Filer may not have an ownership interest in the drop-off collection point, the Electronic Filer may have a written or oral agreement with an entity on that site that relates to electronic filing.

SECTION 4. ACCEPTANCE IN THE ELECTRONIC FILING PROGRAM

.01 For applicants described in section 4.03 of this revenue procedure, the application period begins on August 1, 1995, and ends on December 1, 1995. Revised applications described in section 4.04 of this revenue procedure must be submitted within 14 days of the change(s) reflected on the revised Form 8633, Application to Participate in the Electronic Filing Program.

.02 If an Electronic Filer has a foreign location, that location must list an APO or FPO address on Form 8633, line 1r.

.03 Applicants must file a new Form 8633 with fingerprint cards for the appropriate individuals if:

(1) the applicant has never actively participated in the electronic filing program;

(2) the applicant has previously been denied participation in the Electronic Filing Program; or

(3) the applicant has been suspended from the Electronic Filing Program.

.04 Participants in the 1995 Electronic Filing Program must submit a revised Form 8633 to participate in the 1996 Electronic Filing Program if:

(1) the participant functioned solely as a Software Developer during the 1995 Electronic Filing Program and intends to function as an ERO, Service Bureau, or Transmitter during the 1996 Electronic Filing Program;

(2) there is an additional principal, such as a partner or a corporate officer, that must be listed on Form 8633, line 1k(1), "Principals of Your Firm or Organization";

(3) there is a "Principal" listed on Form 8633, line 1k(1), that should be deleted;

(4) the "Responsible Official" on Form 8633, line 1k(2), changes; or

(5) there is any change to:

(a) the Firm name or Doing Business As (DBA) name;

(b) the business or mailing address;

(c) the contact representative or the alternate contact representative's name or telephone number;

(d) the Electronic Filer's form of organization, as described on Form 8633, line 1k;

(e) the electronic functions performed by an Electronic Filer, other than an Electronic Filer who functions solely as a Software Developer; or

(f) the number or location(s) of drop-off collection points.

.05 A Form 8633 submitted pursuant to section 4.04 (l) through (4) of this revenue procedure must have completed fingerprint cards attached for the appropriate individual(s). All "Principals" and the "Responsible Official" must sign the Form 8633.

.06 A Form 8633 submitted pursuant to section 4.04(5) of this revenue procedure needs to include only entries on lines 1a through 1i and the information being revised. A "Principal" or "Responsible Official" must sign the Form 8633.

.07 To be accepted into the 1996 Electronic Filing Program, an applicant or a 1995 Electronic Filing Program participant who is described in section 4.04(1) through (4) of this revenue procedure must:

(1) file a properly completed Form 8633 with the service center that accepts electronically filed returns from the applicant's state; and

(2) successfully complete the necessary testing at the appropriate service center(s) if the applicant intends to function as a Transmitter or Software Developer.

.08 Each individual listed as a principal or a responsible official must:

(1) be a United States citizen or an alien admitted for lawful permanent residence as described in 8 U.S.C. section 1101(a)(20) (1988);

(2) have attained the age of 21 as of the date of application;

(3) submit with Form 8633 one standard fingerprint card with a full set of fingerprints taken by a law enforcement agency, except as provided in section 4.10 of this revenue procedure;

(4) pass a suitability check that includes a credit check and a fingerprint check; and

(5) if applying to be an ERO, meet state and local licensing and/or bonding requirements in connection with the preparation of tax returns and the collection of prepared returns that taxpayers intend to have electronically filed. However, if the state and local licensing and/or bonding requirements apply to a business entity, the individual(s) must demonstrate that the business entity meets the requirements.

.09 The same "responsible official" may be listed on a maximum of ten applications. The "responsible official" is the person who oversees the daily operations of the office. The "responsible official" must be able to physically visit on a daily basis each office for which he or she is listed as the "responsible official."

.10 An individual may choose to submit evidence of the individual's professional status in lieu of one standard fingerprint card if the individual is:

(1) an attorney in good standing of the bar of the highest court of any State, possession, territory, Commonwealth, or the District of Columbia, and is not currently under suspension or disbarment from practice before the Service;

(2) a certified public accountant who is duly qualified to practice as a certified public accountant in any State, possession, territory, Commonwealth, or the District of Columbia and is not currently under suspension or disbarment from practice before the Service;

(3) an enrolled agent pursuant to part 10 of 31 CFR Subtitle A;

(4) an officer of a publicly held corporation; or

(5) a banking official who is bonded and has been fingerprinted within the last two years.

.11 The Service will issue to eligible applicants for the 1996 Electronic Filing Program, as well as participants in the 1995 Electronic Filing Program who do not have to reapply pursuant to section 4.04 of this revenue procedure:

(1) a letter of acceptance into the Electronic Filing Program for the 1996 filing season;

(2) an Electronic Filing Identification Number (EFIN);

(3) if appropriate, an Electronic Transmitter Identification Number (ETIN);

(4) if appropriate, a Service Bureau Identification Number (SBIN); and

(5) if appropriate, a Collection Point Identification Number (CPIN). No one without these credentials may participate in the Electronic Filing Program for the 1996 filing season.

.12 If an Electronic Filer is a Software Developer who performs no other function in the Electronic Filing Program but software development, no principal or responsible official needs to pass a suitability check.

.13 If an Electronic Filer will have a drop-off collection point(s), as defined in section 3.05, for the 1996 filing season, an Electronic Filer must submit a Form 8633 that lists each drop-off collection point. By listing a drop-off collection site on Form 8633, an Electronic Filer becomes a "parent" in relation to a listed drop-off collection point.

.14 The following reasons may result in the rejection of an application to participate in the 1996 Electronic Filing Program (this list is not all-inclusive):

(1) conviction of any criminal offense under the revenue laws of the United States, or of any offense involving dishonesty or breach of trust;

(2) failure to file timely and accurate business or personal tax returns;

(3) failure to timely pay personal or business tax liabilities;

(4) assessment of penalties;

(5) suspension/disbarment from practice before the Service;

(6) other facts or conduct of a disreputable nature that would reflect adversely on the Electronic Filing Program;

(7) misrepresentation on an application;

(8) suspension or rejection from the program in a prior year;

(9) unethical practices in return preparation;

(10) stockpiling returns prior to official acceptance into the Electronic Filing Program (see section 5.15);

(11) knowingly and directly or indirectly employing or accepting assistance from any person who has been denied acceptance into the Electronic Filing Program or is suspended from the Electronic Filing Program. This includes any individual whose actions resulted in the rejection or suspension of a corporation or a partnership from the Electronic Filing Program; or

(12) knowingly and directly or indirectly accepting employment as an associate, correspondent, or as a subagent from, or sharing fees with, any person who has been denied acceptance into the Electronic Filing Program or is suspended from the Electronic Filing Program. This includes any individual whose actions resulted in the rejection or suspension of a corporation or a partnership from the Electronic Filing Program.

SECTION 5. RESPONSIBILITIES OF AN ELECTRONIC FILER

.01 To ensure that complete returns are accurately and efficiently filed, an Electronic Filer must comply with all the publications and notices of the Service. Currently, these publications and notices include:

(1) Handbook for Electronic Filers of Individual Income Tax Returns, Publication 1345;

(2) Electronic Return File Specifications and Record Layouts for Individual Income Tax Returns, Publication 1346;

(3) Test Package for Electronic Filing of Individual Income Tax Returns, Publication 1436; and

(4) Electronic Filing System Bulletin Board (EFS Bulletin Board).

.02 An Electronic Filer must maintain a high degree of integrity, compliance, and accuracy.

.03 An Electronic Filer may only accept returns for electronic filing directly from taxpayers, from drop-off collection sites accurately identified on Form 8633, or from another Electronic Filer.

.04 If the taxpayer's address on a Form W-2, Wage and Tax Statement, Form W-2G, Statement for Recipients of Certain Gambling Winnings, Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., Form 1040, Schedule C, Profit or Loss From Business (Sole Proprietorship), or Form 1040, Schedule C-EZ, Profit or Loss From Business - Short Version, or any other tax form is different than the taxpayer's address in the entity section of the electronic portion of the taxpayer's Form 1040, the ERO or the Service Bureau must input for transmission to the Service those addresses that differ from the taxpayer's address on the electronic portion of the taxpayer's Form 1040.

.05 If an Electronic Filer charges a fee for the electronic transmission of a tax return, the fee may not be based on a percentage of the refund amount or on the amount of taxes saved. An Electronic Filer may not charge a separate fee for Direct Deposit. See section 9 of this revenue procedure.

.06 An Electronic Filer who has been accepted into the 1996 Electronic Filing Program must submit a revised Form 8633 to the appropriate service center when any of the conditions or changes described in section 4.04 of this revenue procedure occur.

.07 An Electronic Filer must notify the service center where the Electronic Filer filed its Form 8633 within 14 days of discontinuing its participation in the Electronic Filing Program.

.08 An Electronic Filer must ensure that an electronic return is filed on or before the due date of the return. A tax return is not considered filed until the electronic portion of the tax return has been acknowledged as accepted for processing and a completed and signed Form 8453 has been received by the Service. However, if the electronic portion of a return is successfully transmitted on or shortly before the due date and the Electronic Filer complies with section 7.01 of this revenue procedure, the return will be deemed timely filed. If the electronic portion of a return is initially transmitted on or shortly before the due date and is ultimately rejected, but the Electronic Filer complies with section 5.14 of this revenue procedure, the return will be deemed timely filed. In the case of a balance due return, see section 11 of this revenue procedure for instructions on how to make a timely payment of tax.

.09 An Electronic Filer who functions as an ERO must:

(1) comply with the procedures for completing and securing Forms 8453 described in section 7 of this revenue procedure;

(2) comply with the procedures described in section 11 of this revenue procedure for handling a balance due return;

(3) while returns are being filed, retain and, if requested, make available to the Service the following material at the business address from which a return was accepted for electronic filing:

(a) a copy of the signed Form 8453 and Forms W-2, W-2G, and 1099-R;

(b) a complete copy of the electronic portion of the return (may be retained on magnetic media) that can be readily and accurately converted into an electronic transmission that the Service can process; and

(c) the acknowledgement file received from the Service or from a third party Transmitter; and

(4) retain until the end of the calendar year in which a return was filed, and, if requested, make available to the Service the materials described in section 5.09(3) of this revenue procedure at either the business address from which a return was electronically filed or from the contact person named on Form 8633.

.10 An ERO who is the paid preparer of an electronic tax return must also retain for the prescribed amount of time the materials described in section 1.6107-1(b) that are required to be kept by an income tax return preparer.

.11 An ERO must identify the paid preparer (if any) in the appropriate field of the electronic return, in addition to ensuring that the paid preparer signed Form 8453. If Form 8453 is not signed by the paid preparer, the ERO must attach a copy of the Form 1040EZ signed by the paid preparer below the taxpayer's signature or pages one and two of Form 1040A or Form 1040 that includes the paid preparer's signature. These copies must be marked "COPY-DO NOT PROCESS" to prevent duplicate filings.

.12 An ERO must ensure against the unauthorized use of its EFIN and, if applicable, the CPIN(s) issued to its drop-off collection point(s). An ERO must not transfer its EFIN or the CPIN(s) of its drop-off collection point(s) by sale, merger, loan, gift, or otherwise to another entity.

.13 An ERO must not electronically file or otherwise transfer to a Service Bureau or a Transmitter, a return before February 15, 1996, without a Form W-2, Form W-2G, or Form 1099 R. A paycheck stub, a substitute Form W-2, or any other form of substitute wage and tax documentation is unacceptable before February 15.

.14 If the electronic portion of a taxpayer's return is acknowledged as rejected by the Service, and the reason for the rejection cannot be rectified by the actions described in section 6.02(3), the ERO, within 24 hours of receiving the rejection, must take all reasonable steps to tell the taxpayer that the taxpayer's return has not been filed. When the ERO advises the taxpayer that the taxpayer's return has not been filed, the ERO must provide the taxpayer with the reject code(s), an explanation of the reject code(s), and the sequence number of each reject code(s). If the taxpayer chooses not to have the previously rejected return retransmitted or if the return cannot be accepted for processing, the taxpayer must file a paper return by the later of:

(1) the due date of the return; or

(2) within ten calendar days of the Service's acknowledgement that the return is rejected or the notice that the return cannot be retransmitted with an explanation of why the return is being filed after the due date.

.15 An ERO is responsible for ensuring that stockpiling does not occur at its office(s) or drop-off collection point(s). Stockpiling means collecting returns from taxpayers or from another Electronic Filer prior to official acceptance into the Electronic Filing Program, or, after official acceptance into the Electronic Filing Program, waiting more than three calendar days to transmit a return to the Service after receiving the information necessary for an electronic transmission of a tax return.

.16 An Electronic Filer who functions as a Service Bureau must:

(1) deliver all electronic returns to a Transmitter or to the ERO who gave the electronic returns to the Service Bureau within three calendar days of receipt;

(2) retrieve the acknowledgement file from the Transmitter within one calendar day of receipt by the Transmitter;

(3) initiate the communication of the acknowledgement file to the ERO (whether related or not) within one work day of retrieving the acknowledgement file;

(4) if the Service Bureau processes Forms 8453, send back to the ERO any return and Form 8453 that needs correction, unless the correction is described in section 6.02(3);

(5) accept tax return information only from an ERO who is in good standing in the Electronic Filing Program;

(6) include its SBIN and the ERO's EFIN with all return information the Service Bureau forwards to a Transmitter or sends back to an ERO;

(7) retain each acknowledgement file received from a Transmitter until the end of the calendar year in which the electronic return was filed;

(8) if requested, serve as a contact point between its client EROs and the Service;

(9) if requested, provide the Service with a list of each client ERO; and

(10) ensure against the unauthorized use of its SBIN. A Service Bureau must not transfer its SBIN by sale, merger, loan, gift, or otherwise to another entity.

.17 An Electronic Filer who functions as a Transmitter must:

(1) transmit all electronic returns within three calendar days of receipt, retrieve the acknowledgement file within two work days of transmission, and initiate the communication of the acknowledgement file to the ERO or the Service Bureau (whether or not the ERO or the Service Bureau are related to the Transmitter) within two work days of retrieving the acknowledgement file;

(2) match the acknowledgement file to the original file and resubmit those returns that are not acknowledged as accepted for processing after corrections are made;

(3) if an acknowledgement of acceptance for processing has not been received by the Transmitter within two work days of transmission or if a Transmitter receives an acknowledgement for a return that was not transmitted on the designated transmission, the Transmitter must immediately contact the Electronic Filing Unit at the appropriate service center for further instructions;

(4) if a return has been rejected after three transmission attempts, the Transmitter must contact the appropriate service center Electronic Filing Unit for assistance;

(5) ensure the security of all transmitted data;

(6) promptly correct any transmission error that causes an electronic return to be rejected;

(7) retain an acknowledgement file received from the Service until the end of the calendar year in which the electronic return was filed;

(8) ensure against the unauthorized use of its EFIN or ETIN. A Transmitter must not transfer its EFIN or ETIN by sale, merger, loan, gift, or otherwise to another entity; and

(9) not use software that has a Service assigned production password built into the software.

.18 A Transmitter who provides transmission services to other unrelated Electronic Filers must only accept electronic returns for transmission to the IRS Data Communications Subsystem from accepted Electronic Filers. A Transmitter must include the ERO's EFIN and if applicable, the CPIN on each return that the Transmitter accepts from an ERO. In addition, a Transmitter must also include a Service Bureau's SBIN if a Service Bureau formats the return information.

.19 An Electronic Filer who functions as a Software Developer must:

(1) promptly correct any software error which causes an electronic return to be rejected;

(2) promptly distribute any software correction;

(3) ensure that any software package that will be used to transmit any returns from multiple Electronic Filers has the capability of combining returns from these Electronic Filers into one Service transmission file taking into account the sorting requirements of the Declaration Control Number (DCN);

(4) ensure that no other entity uses the Software Developer's EFIN or ETIN. A Software Developer must not transfer by sale, merger, loan, gift, or otherwise its EFIN or ETIN to another entity; and

(5) not incorporate into its software a Service assigned production password.

.20 An Electronic Filer with a drop-off collection point is the ERO for that drop-off collection point. The ERO must clearly display its name at each drop-off collection point. The Service will hold the ERO responsible for any violation of the advertising standards described in section 12 or any other violation of this revenue procedure that occurs at a drop-off collection point listed on the ERO's Form 8633. The ERO must also serve as the contact point between the Service and the drop-off collection point for all correspondence including problem resolution and report evaluation.

.21 In addition to the specific responsibilities described in this section, an Electronic Filer must meet all the requirements of this revenue procedure to keep the privilege of participating in the Electronic Filing Program.

SECTION 6. PENALTIES

.01 Penalties for Disclosure or Use of Information.

(1) An Electronic Filer, except a Software Developer, is a tax return preparer (Preparer) under the definition of section 301.7216- 1(b) of the Regulations on Procedure and Administration. A Preparer is subject to a criminal penalty for disclosure or use of tax return information, as described in section 301.7216-1(a). In general, that regulation provides that any preparer who discloses or uses any tax return information for a purpose other than preparing, assisting in preparing, or obtaining or providing services in connection with the preparation of a tax return is guilty of a misdemeanor. In addition, section 6713 of the Internal Revenue Code provides for civil penalties that may be assessed against a preparer who makes an unauthorized disclosure or use of tax return information.

(2) Under section 301.7216-2(h), disclosure of tax return information among accepted Electronic Filers for the purpose of preparing a return is permissible. For example, it is permissible for an ERO to pass on tax return information to a Service Bureau and/or a Transmitter for the purpose of having an electronic return formatted and transmitted to the Service. However, if the tax return information is disclosed or used in any other way, a Service Bureau and/or a Transmitter may be guilty of a misdemeanor as described in section 6.01(1) of this revenue procedure.

.02 Other Preparer Penalties.

(1) Preparer penalties may be asserted against an individual or firm who meets the definition of an income tax return preparer under section 7701(a)(36) and section 301.7701-15. Examples of preparer penalties that may be asserted under appropriate circumstances include, but are not limited to, those set forth in sections 6694, 6695, and 6713.

(2) Under section 301.7701-15(d), Electronic Return Collectors, Service Bureaus, Transmitters, and Software Developers are not income tax return preparers for the purpose of assessing most preparer penalties as long as their services are limited to "typing, reproduction, or other mechanical assistance in the preparation of a return or claim for refund."

(3) If an Electronic Return Collector, Service Bureau, Transmitter, or Software Developer alters the return information in a nonsubstantive way, this alteration will be considered to come under the "mechanical assistance" exception described in section 301.7701- 15(d)(1). A nonsubstantive change is a correction or change limited to a transposition error, misplaced entry, spelling error, or arithmetic correction that falls within the following tolerances:

(a) the Total Tax amount, Withholding amount, Refund amount, or Amount Owed shown on Form 8453 differs from the corresponding amount on the electronic portion of the tax return by no more than $7;

(b) the Total Income amount shown on Form 8453 differs from the corresponding amount on the electronic portion of the tax return by no more than $25; or

(c) dropping cents and rounding to whole dollars.

(4) If an Electronic Return Collector, Service Bureau, or Transmitter alters the return information in a substantive way, rather than having the taxpayer alter the return, the Electronic Return Collector, Service Bureau, or Transmitter will be considered to be an income tax return preparer for purposes of section 7701(a)(36).

(5) If an Electronic Return Collector, Service Bureau, or Transmitter, or the product of a Software Developer, goes beyond mechanical assistance, any of these parties may be held liable for income tax return preparer penalties. Rev. Rul. 85-189, 1985-2 C.B. 341, describes a situation where a Software Developer was determined to be an income tax return preparer and subject to certain preparer penalties.

.03 In addition to the above specified provisions, the Service reserves the right to assert all appropriate preparer, nonpreparer, and disclosure penalties against an Electronic Filer as warranted under the circumstances.

SECTION 7. FORM 8453, U.S. INDIVIDUAL INCOME TAX DECLARATION FOR ELECTRONIC FILING

.01 Procedures for Completing Form 8453.

(1) Form 8453 must be completed in accordance with the instructions for Form 8453.

(2) The taxpayer(s)'s name, address, social security number(s), tax return information, and direct deposit of refund information in the electronic transmission must be identical to the information on the Form 8453 that the taxpayer(s) signed and provided for submission to the Service.

(3) An Electronic Filer, a financial institution, or any other entity associated with the electronic filing of a taxpayer's return must not put its address in the section reserved for the taxpayer's address on Form 8453 or anywhere in the electronic portion of a return.

(4) After the return has been prepared and before the return is electronically transmitted, the taxpayer must verify the information on the electronic portion of the return and on Form 8453, and must sign Form 8453. The taxpayer may verify the information on the electronic portion of the return by viewing this information on a computer display terminal. Both spouses' signatures are required on a joint return prior to the electronic transmission of the tax return. An easily readable paper copy of the prepared return must be provided to the taxpayer at the time of signature.

(5) An Electronic Filer must submit the taxpayer's Form 8453 to the appropriate service center within one work day after the Electronic Filer receives acknowledgment that the electronic portion of the taxpayer's return has been accepted for processing.

(6) If an Electronic Filer functions as an ERO, the Electronic Filer must sign the ERO's Declaration on Form 8453.

(7) If the ERO is also the paid preparer, the ERO must check the "Paid Preparer" box and sign the ERO Declaration on Form 8453.

.02 Corrections to Form 8453.

(1) A new Form 8453 is not required for a nonsubstantive change. A nonsubstantive change is limited to a correction that does not exceed the tolerances, described in section 7.02(2) of this revenue procedure for arithmetic errors, a transposition error, a misplaced entry, or a spelling error. The incorrect nonsubstantive information must be neatly lined through on the Form 8453 and the correct data entered next to the lined-through entry. Also, the person making the correction must initial the correction.

(2) The tolerances for section 7.02(1) of this revenue procedure are:

(a) the "Total Income" does not differ from the amount on the electronic tax return by more than $25; or

(b) the "Total Tax", the "Federal income tax withheld", the "Refund", or the "Amount you owe" does not differ from the amount on the electronic portion of the tax return by more than $7.

(3) If the ERO makes a substantive change to the electronic portion of the return after Form 8453 has been signed by the taxpayer, but before it is transmitted, the ERO must have all the necessary parties described above sign a new Form 8453 that reflects the corrections before the return is transmitted.

(4) Dropping cents or rounding to whole dollars does not constitute a substantive change or alteration to the return unless the amount differs by more than the above tolerances. All rounding should be accomplished in accordance with the instructions in the Form 1040 tax package.

.03 If the Service determines that a Form 8453 is missing, the ERO must provide the Service with a replacement. The ERO must also provide a copy of the Form(s) W-2, W-2G, 1099R, and all other attachments to Form 8453.

.04 If a substitute Form 8453 is used, it must be approved by the Service prior to use. See Rev. Proc. 94-34, 1994-1 C.B. 628, as amended by Rev. Proc. 94-51, 1994-2 C.B. 712.

SECTION 8. INFORMATION AN ELECTRONIC FILER MUST PROVIDE TO THE TAXPAYER

.01 The ERO must furnish the taxpayer with a complete paper copy of the taxpayer's return. A complete copy of a taxpayer's return includes a copy of the taxpayer's completed Form 8453, the nonelectronic portion of a return, and a print out of the electronic portion of the return. This information can be contained on a replica of an official form or on an unofficial form. However, on an unofficial form, data entries must be referenced to the line numbers on an official form.

.02 The ERO must advise the taxpayer to retain a complete copy of the return and any supporting material.

.03 The ERO must advise the taxpayer that an amended return, if needed, must be filed as a paper return and mailed to the service center that would handle the taxpayer's paper return.

.04 The ERO must, upon request, provide the taxpayer with the Document Control Number and the date the electronic portion of the taxpayer's return was acknowledged as accepted for processing by the Service.

.05 If a taxpayer inquires about the status of a tax return, the ERO must advise the taxpayer to call the local IRS district office Tele-Tax number. The ERO should also advise the taxpayer to wait at least three weeks from the acceptance date of the electronic return before calling the local IRS district office Tele-Tax number.

.06 If a taxpayer chooses to use an address other than his or her home address on the return, the Electronic Filer must inform the taxpayer that the address on the return will become the taxpayer's "last known address" for all purposes of the Internal Revenue Code. This means that all future written communications from the Service to the taxpayer will be sent to the address on the return rather than the taxpayer's home address. In particular, the Service is required to send the following notices to a taxpayer's "last known address":

(1) formal document request for the production of foreign-based documentation (section 982(c)(1));

(2) notification of disclosure proceedings (section 6110(f)(3)(B));

(3) notice of deficiency (section 6212(b));

(4) notice and demand for tax (section 6303(a));

(5) notice of revocation of certification of release or nonattachment of a lien (section 6325(f)(2)(A));

(6) notice of intention to levy (section 6331(d)(2)(C));

(7) copy of notice of levy with respect to a life insurance or endowment contract (section 6332(b)(1));

(8) notice of seizure and sale (section 6335(a) and (b));

(9) notice of liability in transferee cases (section 6901(g)); and

(10) notice of third-party summons (section 7609(a)(2)). See Rev. Proc. 90-18, 1990-1 C.B. 491, for additional information about "last known address."

SECTION 9. DIRECT DEPOSIT OF REFUNDS

.01 The Service will ordinarily process a request for Direct Deposit but reserves the right to issue a paper refund check.

.02 The Service does not guarantee a specific date by which a refund will be directly deposited into the taxpayer's financial institution account.

.03 Neither the Service nor Financial Management Service (FMS) is responsible for the misapplication of a Direct Deposit that is caused by error, negligence, or malfeasance on the part of the taxpayer, Electronic Filer, financial institution, or any of their agents.

.04 An ERO must:

(1) ensure that the taxpayer is aware of all the general information regarding a Direct Deposit;

(2) not charge a separate fee for a Direct Deposit;

(3) accept any Direct Deposit election to any eligible financial institution designated by the taxpayer;

(4) ensure that the taxpayer is eligible to choose Direct Deposit;

(5) verify that the taxpayer has entered the Direct Deposit information requested on Part II of Form 8453 correctly and that the information entered is the information transmitted with the electronic portion of the return;

(6) caution the taxpayer that once an electronic return has been accepted for processing by the Service:

(a) the Direct Deposit election cannot be rescinded;

(b) the Routing Transit Number (RTN) of the financial institution cannot be changed; and

(c) the taxpayer's account number cannot be changed; and

(7) advise the taxpayer of the procedures to be followed if there is a need to contact the Service about a Direct Deposit request.

SECTION 10. REFUND ANTICIPATION LOANS

.01 A Refund Anticipation Loan (RAL) is money borrowed by a taxpayer that is based on a taxpayer's anticipated income tax refund. The Service has no involvement in RALs. A RAL is a contract between the taxpayer and the lender.

.02 Any entity that is involved in the Electronic Filing Program, including a financial institution that accepts direct deposits of income tax refunds, has an obligation to every taxpayer who applies for a RAL to clearly explain to the taxpayer that a RAL is in fact a loan, and not a substitute for or a quicker way of receiving an income tax refund. An Electronic Filer must advise the taxpayer that if a Direct Deposit is not timely, the taxpayer may be liable to the lender for additional interest on the RAL.

.03 An Electronic Filer may assist a taxpayer in applying for a RAL.

.04 An Electronic Filer may charge a flat fee to assist a taxpayer in applying for a RAL. The fee must be identical for all of the Electronic Filer's customers and must not be related to the amount of the refund or a RAL. The Electronic Filer must not accept a fee from a financial institution for any service connected with a RAL that is contingent upon the amount of the refund or a RAL.

.05 The Service has no responsibility for the payment of any fees associated with the preparation of a return, the electronic transmission of a return, or a RAL.

.06 An Electronic Filer may disclose tax information to the lending financial institution in connection with an application for a RAL only with the taxpayer's written consent as specified in section 301.7216-3(b).

.07 An Electronic Filer that is also the return preparer, and the financial institution or other lender that makes an RAL, may not be related taxpayers within the meaning of section 267 or section 707.

.08 Section 6695(f) imposes a $500 penalty on a return preparer who endorses or negotiates a refund check issued to any taxpayer other than the return preparer. However, a bank, as defined in section 581, may accept the full amount of a refund check as a deposit in the taxpayer's account for the benefit of the taxpayer. Section 1.6695-1(f) clarifies section 6695 of the Code by explaining that the prohibition on a return preparer negotiating a refund check is limited to a refund check for a return that the return preparer prepared. A preparer that is also a financial institution, but has not made a loan to the taxpayer on the basis of the taxpayer's anticipated refund, may (1) cash a refund check and remit all of the cash to the taxpayer or accept a refund check for deposit in full to a taxpayer's account, provided the bank does not initially endorse or negotiate the check; or (2) endorse a refund check for deposit in full to a taxpayer's account pursuant to a written authorization of the taxpayer. A preparer bank may also subsequently endorse or negotiate a refund check as part of the check-clearing process through the financial system after initial endorsement. Any income tax return preparer that violates this provision may be suspended from the Electronic Filing Program.

SECTION 11. BALANCE DUE RETURNS

.01 All service centers that accept electronically filed returns will accept electronically filed balance due returns.

.02 The Electronic Filer must furnish Form 1040-V, Electronic Payment Voucher, to a taxpayer who electronically files a balance due return.

.03 To expedite the crediting of a tax payment, a taxpayer who electronically files a balance due return should mail his or her tax payment with either Form 1040-V, Payment Voucher, or the scannable payment voucher that is included in some tax packages. Each of these options has specific mailing instructions.

.04 A taxpayer who electronically files a balance due return must make a full and timely payment of any tax that is due. Failure to make full payment of any tax that is due on or before April 15, 1996, will result in the imposition of interest and may result in the imposition of penalties.

SECTION 12. ADVERTISING STANDARDS FOR ELECTRONIC FILERS AND FINANCIAL INSTITUTIONS

.01 An Electronic Filer shall comply with the advertising and solicitation provisions of 31 C.F.R. Part 10 (Treasury Department Circular No. 230). This circular prohibits the use or participation in the use of any form of public communication containing a false, fraudulent, misleading, deceptive, unduly influencing, coercive, or unfair statement or claim. In addition, advertising must not imply a special relationship with the Service, FMS, or the Treasury Department. Any claims concerning faster refunds by virtue of electronic filing must be consistent with the language in official Service publications.

.02 An Electronic Filer must adhere to all relevant federal, state, and local consumer protection laws.

.03 An Electronic Filer must not use the Service's name, "Internal Revenue Service" or "IRS", within a firm's name.

.04 An Electronic Filer must not use improper or misleading advertising in relation to the Electronic Filing Program (including the time frames for refunds and RALs).

.05 Use of Direct Deposit name and logo.

(1) The name "Direct Deposit" will be used with initial capital letters or all capital letters.

(2) The logo/graphic for Direct Deposit will be used whenever feasible in advertising copy.

(3) The color or size of the Direct Deposit logo/graphic may be changed when used in advertising pieces.

.06 Advertising materials shall not carry the FMS, IRS, or other Treasury Seals.

.07 Advertising for a cooperative electronic return project (public/private sector) must clearly state the names of all cooperating parties.

.08 In advertising the availability of a RAL, an Electronic Filer and a financial institution must clearly (and, if applicable, in easily readable print) refer to or describe the funds being advanced as a loan, not a refund; that is, it must be made clear in the advertising that the taxpayer is borrowing against the anticipated refund and not obtaining the refund itself from the financial institution.

.09 If an Electronic Filer uses radio or television broadcasting to advertise, the broadcast must be pre-recorded. The Electronic Filer must keep a copy of the pre-recorded advertisement for a period of at least 36 months from the date of the last transmission or use.

.10 If an Electronic Filer uses direct mail or fax communications to advertise, the Electronic Filer must retain a copy of the actual mailing or fax, along with a list or other description of persons to whom the communication was mailed, faxed, or otherwise distributed for a period of at least 36 months from the date of the last mailing, fax, or distribution.

.11 Acceptance to participate in the Electronic Filing Program does not imply endorsement by the Service or FMS of the software or quality of services provided.

SECTION 13. MONITORING AND SUSPENSION OF AN ELECTRONIC FILER

.01 The Service will monitor an Electronic Filer for conformity with this revenue procedure. The Service can immediately suspend, without notice, an Electronic Filer from the Electronic Filing Program. However, in most circumstances, a suspension from participation in the Electronic Filing Program is effective as of the date of the letter informing the Electronic Filer of the suspension. Before suspending an Electronic Filer, the Service may issue a warning letter that describes specific corrective action for deviations from this revenue procedure.

.02 If a "Principal" or "Responsible Official" is suspended from the Electronic Filing Program, every entity that listed the suspended "Principal" or "Responsible Official" on its Form 8633 will also be suspended.

.03 The Service will monitor the timely receipt of Forms 8453, as well as their overall legibility (especially the recording of the DCN).

.04 The Service will monitor the quality of an Electronic Filer's transmissions throughout the filing season. The Service will also monitor electronic returns and tabulate rejections, errors, and other defects. If quality deteriorates, the Electronic Filer will receive a warning from the Service.

.05 The Service will monitor drop-off collection points and advise a parent of any Electronic Filing Program violations the Service has encountered with a parent's drop-off collection point. If a parent fails to correct a drop-off collection point problem, the parent will be required to eliminate that drop-off collection point. Failure to take corrective action or eliminate a drop-off collection point will cause the Service to suspend the parent. If the Service initiates suspension action, it will apply to all returns filed by the parent.

.06 The Service will monitor complaints about an Electronic Filer and issue a warning or suspension letter as appropriate.

.07 The Service reserves the right to suspend the electronic filing privilege of any Electronic Filer who violates any provision of this revenue procedure. Generally, the Service will advise a suspended Electronic Filer concerning the requirements for reacceptance into the Electronic Filing Program. The following reasons may lead to a warning letter and/or suspension of an Electronic Filer from the Electronic Filing Program (this list is not all-inclusive):

(1) the reasons listed in section 4.14 of this revenue procedure;

(2) deterioration in the format of individual transmissions;

(3) unacceptable cumulative error or rejection rate;

(4) untimely received, illegible, incomplete, missing, or unapproved substitute Forms 8453;

(5) stockpiling returns at any time while participating in the Electronic Filing Program;

(6) failure on the part of a Transmitter to retrieve acknowledgement files within two work days of transmission by the Service;

(7) failure on the part of a Transmitter to initiate the communication of acknowledgement files to clients within two work days of receipt of the acknowledgement files from the Service;

(8) significant complaints about an Electronic Filer's performance in the Electronic Filing Program;

(9) failure on the part of an Electronic Filer to ensure that no other entity uses the Electronic Filer's EFIN and/or ETIN; (10) having more than one EFIN for the same business entity at the same location (the business entity is generally the entity that reports on its return the income derived from electronic filing), unless the Service has issued more than one EFIN to a business entity. For example, the Service may issue more than one EFIN to accommodate high volumes of returns, or the filing of a Federal/State return;

(11) failure on the part of a Transmitter to include a Service Bureau's SBIN in the transmission of a return submitted by a Service Bureau;

(12) failure on the part of an ERO to include a drop-off collection point's CPIN as part of a return collected from a drop-off collection point;

(13) failure on the part of an Electronic Filer to cooperate with the Service's efforts to monitor Electronic Filers and investigate electronic filing abuse;

(14) failure on the part of an Electronic Filer to properly use the standard/non-standard W-2 indicator;

(15) failure on the part of an Electronic Filer to properly use the refund anticipation loan (RAL) indicator;

(16) failure on the part of a Service Bureau or a Transmitter to include the ERO's EFIN as part of a return that the ERO submits to the Service Bureau or the Transmitter;

(17) violation of the advertising standards described in section 12;

(18) failure to maintain and make available records as described in section 5.09(4) of this revenue procedure;

(19) accepting a tax return for electronic filing either directly or indirectly from a person (other than the taxpayer who is submitting his or her return) who is not in the Electronic Filing Program;

(20) submitting the electronic portion of a return with information that is not identical to the information on Form 8453;

(21) failure to timely pay any applicable fees, as implemented by subsequent guidance;

(22) filing returns before February 15, 1996, with any form of substitute W-2 or wage and tax documentation; or

(23) failure to timely submit a revised Form 8633 notifying the Service of changes described in section 4.04 of this revenue procedure.

.08 The Service will list in the Internal Revenue Bulletin, district office listings, district office newsletters, and on the EFS Bulletin Board the name and owner(s) of any entity suspended from the Electronic Filing Program and the effective date of the suspension.

.09 A district director may warn Electronic Filers who are using the services of a rejected or a suspended Electronic Filer that sections 4.14(11) and (12) of this revenue procedure prohibit a business relationship with a rejected or a suspended Electronic Filer. However, in appropriate circumstances, the Service may immediately suspend the Electronic Filer.

.10 Denials of applications and suspensions of participation in the Electronic Filing Program will result in:

(1) a rejected applicant not being reconsidered for participation in the Electronic Filing Program for at least two years; and

(2) a suspended Electronic Filer not being reconsidered for participation in the Electronic Filing Program for at least two years.

For the purposes of this section 13.10, two years means the remaining months in the calendar year of denial of participation or suspension and the following two calendar years.

SECTION 14. ADMINISTRATIVE REVIEW PROCESS FOR DENIAL OF PARTICIPATION IN THE ELECTRONIC FILING PROGRAM

.01 An applicant who has been denied participation in the Electronic Filing Program has the right to an administrative review. During the administrative review process, the denial of participation remains in effect.

.02 In response to the submission of a Form 8633, the appropriate district office will either (1) accept an applicant into the Electronic Filing Program, or (2) issue a proposed letter of denial that explains to the applicant why the district office proposes to reject the application to participate in the Electronic Filing Program.

.03 An applicant who receives a proposed letter of denial may respond, in writing, to the district office that issued the proposed letter of denial. The applicant's response must address the district office's explanation for proposing the denial to participate. The district office must receive the applicant's response within 30 calendar days of the date of the proposed letter of denial.

.04 Upon receipt of an applicant's written response, the district office will reconsider its proposed letter of denial. The district office may (1) withdraw its proposed letter of denial and admit the applicant into the Electronic Filing Program, or (2) finalize its proposed letter of denial and issue it to the applicant.

.05 If an applicant receives a final letter from the district office that denies the applicant participation in the Electronic Filing Program, the applicant is entitled to an appeal, in writing, to the Director of Practice.

.06 The appeal must be filed with the district office that issued the denial letter within 30 calendar days of the date of the denial letter. An applicant's written appeal must contain a detailed explanation, with supporting documentation, of why the denial should be reversed. In addition, the applicant must include a copy of the applicant's Form 8633 and a copy of the denial letter.

.07 The district office whose denial is being appealed will, upon receipt of a written appeal to the Director of Practice, forward to the Director of Practice its file on the applicant and the material described in section 14.06 of this revenue procedure that the applicant has submitted to the district office. The district office will forward to the Director of Practice these materials within 15 calendar days of receipt of the applicant's appeal to the Director of Practice.

.08 Failure to respond within the 30-day periods described in sections 14.03 and 14.06 of this revenue procedure irrevocably terminates an applicant's right to an administrative review or appeal.

SECTION 15. ADMINISTRATIVE REVIEW PROCESS FOR SUSPENSION FROM THE ELECTRONIC FILING PROGRAM

.01 An Electronic Filer who has been suspended from participation in the Electronic Filing Program has the right to an administrative review. During the administrative review process, the suspension remains in effect.

.02 If an Electronic Filer receives a proposed suspension letter from a district office or service center, the Electronic Filer may submit a detailed written explanation, with supporting documentation, of why the proposed suspension letter should be withdrawn. The Electronic Filer must ensure that the district office or service center that issued the proposed suspension letter receives the Electronic Filer's written response within 30 calendar days of the date of the proposed suspension letter.

.03 Upon receipt of the Electronic Filer's written response, the district office or service center will reconsider its proposed suspension of the Electronic Filer. The district office or service center will either withdraw its proposed suspension letter and reinstate the Electronic Filer or finalize the suspension letter and issue it to the Electronic Filer.

.04 If an Electronic Filer receives a suspension letter from a district office or a service center, the Electronic Filer is entitled to an appeal, in writing, to the Director of Practice.

.05 The Electronic Filer must ensure that the district office or service center that issued the suspension letter receives the Electronic Filers's written appeal for review by the Director of Practice within 30 calendar days of the date of the suspension letter. The Electronic Filer's written appeal for review must contain detailed reasons, with supporting documentation, for reversal of the suspension. In addition, the Electronic Filer must include a copy of its Form 8633 and a copy of the suspension letter.

.06 The district office or service center whose decision to suspend is being appealed will, upon receipt of a written appeal to the Director of Practice, forward to the Director of Practice its file on the Electronic Filer and the material described in section 15.05 of this revenue procedure that the Electronic Filer has submitted to the district office or the service center. The district office or the service center will forward to the Director of Practice these materials within 15 calendar days of the receipt of an Electronic Filer's written request for appeal.

.07 Failure to appeal within the 30-day period described in section 15.05 of this revenue procedure irrevocably terminates an Electronic Filer's right to an appeal.

SECTION 16. VITA AND TCE SPONSORED ELECTRONIC FILING

.01 This revenue procedure applies to VITA (Volunteer Income Tax Assistance) and TCE (Tax Counselling for the Elderly) sponsors subject to the exceptions and restrictions described in this section.

.02 For purposes of this section, the District Director may be represented by a person designated by the District Director such as a District Office Electronic Filing Coordinator (DOEFC) or a Taxpayer Education Coordinator.

.03 To be accepted in, or to continue participation in, the Electronic Filing Program, a VITA or TCE sponsor must:

(1) have obtained the District Director's permission (and, in the case of a TCE sponsor, the permission of the Service office that is funding the TCE program) to provide electronic filing; and

(2) have a manual or electronic quality review system for each return to be electronically filed.

.04 The District Director will advise the VITA and TCE sponsor how to submit or transmit returns. Some of the options available to the District Director are:

(1) having the VITA or TCE sponsor submit returns on paper, magnetic disk, or in an electronic transmission to the DOEFC or other locally designated office;

(2) having the VITA or TCE sponsor directly transmit returns to the appropriate service center; or

(3) having the VITA or TCE sponsor use a third party Transmitter.

.05 A VITA or TCE sponsor is not required to manually sign Form 8453 as ERO. However, if the VITA or TCE sponsor chooses not to manually sign Form 8453, the VITA or TCE sponsor must otherwise furnish on Form 8453 its VITA or TCE acronym and, if operating from multiple sites, a site designation number.

.06 A VITA or TCE sponsor can only accept a return for electronic filing that is (1) prepared at the VITA or TCE site by a VITA or TCE volunteer, (2) prepared by a taxpayer that meets the criteria for VITA or TCE assistance, or (3) prepared by a paid preparer that meets the criteria for VITA or TCE assistance.

.07 Only returns and accompanying forms and schedules included in a district, VITA, or TCE training course may be accepted for electronic filing by a VITA or TCE sponsor.

.08 A VITA or TCE sponsor and a District Director may enter into an agreement that provides for the retention of copies of tax returns and Forms 8453 by a District Director. This information must be retained by either the VITA or TCE sponsor or a District Director. This information must not be given to a third party, including a third party Transmitter.

.09 A District Director is responsible for ensuring that Form 8453 is sent to the appropriate Service office or service center. However, a District Director may delegate to the VITA or TCE sponsor the responsibility for mailing Form 8453 to the appropriate office or service center. The VITA or TCE sponsor is responsible for furnishing the DCN to the taxpayer with instructions for including the DCN on Form 8453.

.10 A VITA or TCE sponsor may collect a fee only if it is directly related to defraying the actual cost of electronically transmitting a tax return. A VITA or TCE sponsor may also collect this fee on behalf of a third party Transmitter who electronically transmitted a VITA or TCE return.

.11 Before a VITA or TCE sponsor may collect a fee for electronically filing a tax return, the VITA or TCE sponsor must ensure that the taxpayer understands that:

(1) the fee is not for the preparation of the return; and

(2) the VITA or TCE service is offered without regard to either the electronic filing of a return or the collection of a fee.

SECTION 17. EMPLOYER SPONSORED ELECTRONIC FILING

.01 This revenue procedure applies to an employer who chooses to offer electronic filing as an employee benefit to (1) business owners and spouses, (2) employees and spouses, and/or (3) dependents of business owners and employees, subject to the exceptions and restrictions described in this section.

.02 For purposes of this section, the District Director may be represented by a person designated by the District Director such as a DOEFC or a Taxpayer Education Coordinator.

.03 An employer may choose to electronically transmit returns or may arrange to have tax returns electronically transmitted through a third party. If an employer chooses to transmit returns from more than one location, the employer must submit a properly completed Form 8633 for each location.

.04 An employer may offer electronic filing as an employee benefit whether the employer chooses to transmit tax returns or contracts with a third party to transmit the tax returns.

.05 If an employer contracts with a third party to transmit tax returns, the employer may collect from participating employees a fee that is directly related to defraying the actual cost of electronically transmitting a tax return.

.06 An employer is not required to manually sign Form 8453 as ERO. However, if the employer chooses not to manually sign Form 8453, the employer must otherwise furnish on Form 8453 its name, address, and the designation "Employee Benefit," and if operating from multiple sites, a site designation number.

.07 An employer and a District Director may enter into an agreement that provides for the retention of copies of tax returns including Forms 8453. In the absence of such an agreement, this information must be retained by the employer. This information is not to be given to a third party, including a third party Transmitter.

.08 An employer and a District Director may enter into an agreement that would shift the responsibility for collecting and sending Forms 8453 to the appropriate service center from the employer to the taxpayer. However, the employer will have to furnish the DCN to the taxpayer with instructions for including the DCN on Form 8453.

SECTION 18. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 94-63, 1994-2 C.B. 785, is superseded.

SECTION 19. EFFECTIVE DATE

This revenue procedure is effective November 22, 1995.

SECTION 20. INTERNAL REVENUE SERVICE OFFICE CONTACT

All questions regarding this revenue procedure should be directed to the Internal Revenue Service. The telephone number for this purpose is (202) 283-1010 (not a toll-free number). Questions regarding acquiring an additional EFIN in order to file a Federal/State return should be addressed to the service center where the entity filed its Form 8633.