Sanctioning (Updated 10/24/2013)
Violations of IRS e-file requirements may result in warning or sanctioning Principals, Responsible Officials, and the Authorized IRS e-file Provider. The IRS may sanction any Provider when the firm or any of its Principals or Responsible Officials fail to comply with any requirement or any provision of Publication 3112, as well as other publications and notices that govern IRS e-file. The IRS may also sanction for the same reasons that it denies an application to participate in IRS e-file. See Denial to Participate in IRS e-file. Before sanctioning, the IRS may issue a warning letter that describes specific needed corrective action. The IRS may also sanction without issuance of a warning letter.
Sanctioning may be a written reprimand, suspension or expulsion from participation from IRS e-file, or other sanctions, depending on the seriousness of the infraction. The IRS categorizes the seriousness of infractions as Level One, Level Two, and Level Three. The Provider, Principals and Responsible Officials may appeal sanctions through the Administrative Review Process. Un-reversed suspensions usually make Authorized IRS e-file Providers ineligible to participate in IRS e-file for a period of either one or two years from the effective date of the sanction, but they may reapply after resolution of suitability issues.
In most circumstances, a sanction is effective 30 days after the date of the letter informing of the sanction, or the date the reviewing office or the Office of Appeals affirms the sanction, whichever is later. In certain circumstances, the IRS can immediately suspend or expel an Authorized IRS e-file Provider, Principal, or Responsible Official without prior warning or notice. If a Provider, Principal, or Responsible Official is suspended or expelled from participation in IRS e-file, every related entity including those that listed the suspended or expelled Principal or Responsible Official on its IRS e-file Application may also be suspended or expelled.
The IRS may list in the Internal Revenue Bulletin, newsletters, or other media the name and owner of any entity suspended, expelled, or revoked from participation in IRS e- file and the effective date of the IRS action.
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