What Practitioners Need to Know About Modernized e-File (MeF)
The 1040 Modernized e-File (MeF) Program became available for Production returns on February 17, 2010.
The MeF system is a modernized, Internet-based electronic filing platform that has replaced the Legacy tax return filing technology. This transaction-based system allows tax return originators to transmit returns electronically to the IRS in real-time, improving turnaround times. This is a major improvement over the Legacy 1040 e-file system, which processed returns in several batches per day, rather than in real time.
The IRS rolled out 1040 MeF using a three-phase strategy over three years:
The first phase of 1040 MeF occurred in February 2010 and included Form 1040, Form 4868 and 21 1040-related forms and schedules that can be attached to the 1040. The complete list is found on the Forms for 1040 MeF Program webpage.
The second phase of 1040 MeF occurred on January 18, 2011 and included the same forms as the first phase for tax years 2009 and 2010, with the exception of Form 4868. Form 4868 is only accepted for the current tax year. The second phase also included additional hardware and code optimization.
The third phase of 1040 MeF occurred in January 2012 and included the remaining forms filed under the Legacy e-file program.
MeF is now fully implemented, and the Legacy 1040 e-file program has been phased out.
MeF is successfully processing electronically filed tax returns for individuals, corporations, partnerships, excise tax filers and exempt organizations. It provides real-time processing of tax returns and extensions that improves error-detection, standardizes business rules and makes them easier to understand, and expedites acknowledgements. MeF also allows users to attach PDF files. MeF supports the following forms:
- Corporations (1120, 1120S, 1120-F)
- Excise Tax (2290, 720, 8849)
- Employment Tax (940, 940-PR, 941, 941-PR, 941-SS, 943, 943-PR, 944, 945)
- Estates and Trusts (1041)
- Exempt Organizations (990, 990EZ, 990PF, 1120 POL, 990-N, 990 Redesign)
- Extensions (4868, 7004, 8868)
- Individuals (1040)
- Partnerships (1065, 1065-B)
Advantages for Practitioners
MeF will deliver significant value and benefits to practitioners beyond the capabilities of the Legacy system.
Faster acknowledgements: Our goal is to provide a response time of about five minutes to the transmitter in non-peak periods. MeF returns are processed as they are received instead of being delayed in a batch system, as they are under the Legacy program. This enhances customer service by allowing preparers to fix return issues in “real-time.” It will be important for tax practitioners to discuss with their transmitters the response time they will experience.
Specific explanation of errors: Under the Legacy program, one error code may apply to multiple types of e-file errors. MeF error codes use simple wording to clarify each error that triggers a rejection.
Improved processing: Form 1040 and any attachments are submitted electronically to MeF in XML (Extensible Markup Language) format. This allows for more effective use of data. MeF also allows attachments in PDF (Portable Document Format) to accommodate late-legislation and form changes.
Prior year returns: Practitioners will need to talk with their transmitter to determine which prior year returns are accepted by MeF.
Impact on Practitioners
MeF has changed the way tax practitioners transmit e-file returns. Practitioners may not even know that the return was a MeF return, although a rapid acknowledgement will be the giveaway. In most cases, the returns are sent to a transmitter who then sends the return to the IRS. Practitioners should discuss MeF with software development companies, especially when it comes to error codes. They should find out specifically what the provider is offering. Practitioners should learn whether or not their provider will support MeF, how the provider will handle acknowledgements and error codes, and if they will support PDF files.
MeF offers clear advantages to practitioners once it becomes fully operational. The IRS established the 1040 MeF website to keep practitioners updated on the status and changes with 1040 MeF including deployment dates, tax practitioner working group minutes and other information. Practitioners can also send an email to the MeF Mailbox for additional information and help with 1040 MeF.