If a firm, a Principal or a Responsible Official fails the suitability check, the IRS notifies the applicant of denial to participate in IRS e-file, the date when they may reapply and that they may reapply sooner if they resolve the suitability issues. In most circumstances, the denied applicant, Principal or Responsible Official may appeal the decision through the Administrative Review described later.
An applicant, Principal or Responsible Official denied because a federal or state court enjoined it from filing returns or a federal or state legal action prohibits it from participating in IRS e‑file may not appeal its denial. If the injunction or other legal action expires or is reversed, the denied applicant may reapply to participate in IRS e‑file.
The IRS reviews each firm or organization, Principal and Responsible Official listed on the IRS e-file Application. The IRS may deny an applicant participation in IRS e‑file for a variety of reasons that include but are not limited to:
- An indictment or conviction of any criminal offense under the laws of the United States or of a state or other political subdivision, or an active IRS criminal investigation;
- Failure to file accurate federal, state or local tax returns;
- Failure to pay any federal, state or local tax liability;
- Assessment of fraud penalties;
- Suspension/disbarment from practice before the IRS or before a state or local tax agency;
- Disreputable conduct or other facts that may adversely impact IRS e-file;
- Misrepresentation on an IRS e-file Application,which includes using another individual’s personal information (name, SSN, etc.) without their permission (i.e. identity theft);
- Unethical practices in return preparation;
- Non-compliance with §6695(g) of the Internal Revenue Code;
- Stockpiling returns prior to official acceptance to participate in IRS e-file;
- Knowingly and directly or indirectly employing or accepting assistance from any firm, organization or individual denied participation in IRS e-file, or suspended or expelled from participating in IRS e-file. This includes any individual whose actions resulted in the denial, suspension or expulsion of a firm from IRS e-file;
- Knowingly and directly or indirectly accepting employment as an associate, correspondent or as a subagent from, or sharing fees with, any firm, organization or individual denied participation in IRS e-file, or suspended or expelled from participating in IRS e-file. This includes any individual whose actions resulted in denial, suspension or expulsion of a firm from IRS e-file.
- Enjoined from filing returns by a federal or state court injunction or prohibited from filing returns by any Federal or State legal action that prohibits them from participation. A type of such legal action is a Federal Executive Order such as Executive Order 13224 (September 23, 2001), which involves prohibitions directed at terrorist individuals and organizations.