Revised March 3, 2007

Home – Tax Professionals – Mandatory Electronic or 2-D Filing – FAQ for Tax Preparers

Frequently Asked Questions for Tax Preparers

What are the new mandatory filing requirements?

H.B. 190, passed in the 2005 General Session of the Legislature mandates all Utah individual income tax returns prepared by a paid professional be filed electronically or with a 2-D bar code. The new law is effective January 1, 2005.

Provisions of the new law require electronic filing of returns or the filing of paper returns that include a 2-D bar code of the return data by return preparers who prepare a substantial portion of the return for compensation, but does not include someone who:

Merely types, reproduces or performs a similar function relating to the return (secretarial duties);
Prepares the return as an employee for the employer or an officer or another employee of the employer;
Prepares the return in a fiduciary role for another person; or
Prepares the return in response to a tax order issued to the taxpayer.

Amended returns and prior year returns are not subject to this provision.

There is a volume requirement as to whether a preparer must file electronically or with a 2-D bar code. Those subject to the mandatory requirements are preparers who prepare in any calendar year 101 or more Utah individual income tax returns. The prepared returns of two or more preparers affiliated with the same establishment are added together for this determination. Once the volume requirement is met, all returns filed in the subsequent calendar years must be filed electronically or with 2-D bar codes.

There are three exceptions to this mandate:

Returns with a schedule required to be attached to the return that cannot be transmitted electronically or included in the 2-D bar code;
Returns for a taxpayer who requests in writing his return not be filed electronically or with a 2-D bar code ( TC-831, Request to Elect-out of Electronic and 2-D Bar Code Filing, may be used for this purpose); and
The Commission waives the requirement for a preparer for one or more returns because of “undue hardship” on the preparer to file electronically or with a 2-D bar code.

What types of returns are required to be filed under the mandate law?

All current year Utah individual income tax returns are required to be filed electronically or with a 2-D bar code. Prior year, fiduciary, amended, and business type returns are not subject to the new law.

What types of returns are not required to be filed under the mandate law?

Amended and prior year Utah individual returns are not covered by the mandate. Fiduciary, partnership, corporation, or other business returns are also not subject to the mandate.

What about nonresident returns?

If the return is otherwise eligible, it is subject to the mandate and the preparer should file the return electronically or with a 2-D bar code. In Utah, part-year and nonresident individual income tax returns are eligible for electronic filing.

When will mandatory electronic filing or 2-D bar coding take effect?

Mandatory filing electronically or with a 2-D bar code takes effect on January 1, 2005.

Who must file returns electronically or with a 2-D bar code?

Tax preparers who prepare 101 or more Utah individual income tax returns for a taxable year beginning after 2004 will be required to file all subsequent Utah individual income tax returns electronically or with a 2-D bar code.

What if I have a return that cannot be filed electronically or with a 2-D bar code? Will it still be counted towards the 101 return threshold?

Most Utah individual income tax returns are eligible for electronic filing or with a 2-D bar code. However, the following conditions would exempt a Utah return from the requirements of the mandate:

The Utah State Tax Commission, for policy or technical reasons, requires the Utah return to be filed on paper without a 2-D bar code;
A schedule is required to be attached to the return that is not acceptable electronically or in a 2-D bar code;
The taxpayer requests in writing to not have their return filed electronically or with a 2-D bar code. Tax Commission form TC-831, Request to Elect-out of Electronic and 2-D Bar Code Filing, may be used for this purpose, or you may design one of your own.

Even though a return may meet one of these conditions, it will nevertheless still be counted towards the threshold.

If a return has no tax due or refund, is it still subject to the mandatory e-filing requirements?

Yes, returns with no tax due or refund, as well as tax due and refund returns, are subject to the new law.

What if the taxpayer has a balance due? Can he or she still file electronically?

Federal/State electronic filing and Utah TaxExpress allow flexibility for returns to be completed and transmitted early in the season while making providing for payment at a later date. The payment must be made by April 15 th to avoid penalty and interest charges.

When a return is filed electronically, the payment may be made by paper check and should be accompanied by a Utah form TC-547, Income Tax Payment Coupon to assure payment is credited to the proper account.

A taxpayer may also pay their Utah tax liability electronically by using PaymentExpress. For more information, click on http://incometax.utah.gov/filingpayment. html.

What is a 2-D barcode and which commercial tax preparation software companies include 2-D in accordance with Utah's specifications?

2-D barcode technology converts the taxpayer's return information into a unique barcode that is printed on the tax return. The Tax Commission's processing system reads the taxpayer's return information from the 2-D barcode instead of from the fields on the paper return. Although returns submitted electronically are generally processed much faster and more accurately than paper returns, 2-D bar coded returns are the fastest and most accurate method available to process paper returns.

Commercial tax preparation software that includes 2-D barcode technology will print the barcode on the top of page 1 of the TC-40 and will have been submitted to the Tax Commission for testing prior to distributing the software. The barcode will look like this:

For taxable year 2005, 8 commercial tax preparation software companies include 2-D barcode technology for the Utah individual income tax return. To find out if your software supports 2-D barcode technology, we encourage you to contact your software company directly.

If a Utah individual income tax return cannot be filed electronically, does the tax preparer have to submit the return using software that produces a 2-D barcode?

No. If a tax preparer submits all acceptable individual income tax returns electronically, the returns that cannot be submitted electronically do not need to be prepared using software that produces a 2-D barcode.

Does this legislation affect all tax preparers? Are there any exceptions?

This legislation applies to all persons who prepare or who employ one or more individuals to prepare income tax returns for compensation.

This legislation does not apply to persons who volunteer to prepare returns for the elderly or the poor as part of a nonprofit organization's program.

Why is electronic filing or the use of software that produces 2-D barcodes being made mandatory for tax preparers?

By making electronic filing or 2-D bar codes mandatory, the state can significantly reduce the cost of processing tax returns.

The legislation requiring electronic filing or the use of the 2-D barcodes on paper returns accomplishes the following important goals:

The processing time for returns is reduced significantly;
The cost of processing tax returns is greatly reduced; and
Taxpayers can get their refunds faster.

Filing electronically provides the greatest benefits and is encouraged over other methods. However, filing with 2-D bar codes also provides benefits not realized on regular paper returns.

The legislation, therefore, enables the Tax Commission to improve the delivery of services to the citizens of Utah, while reducing the cost of those services through added efficiency.

Are practitioners required to file electronically or can they opt-out?

The law does not permit practitioners to opt-out of the mandatory provisions. Only taxpayers can opt-out for their own return.

How does the Tax Commission determine who is a paid preparer?

The determination is made whenever the "Paid Preparer's Section" of the Utah individual income tax return is completed.

How do I know if the Utah State Tax Commission will require me to file my clients' income tax return electronically?

If you prepare 101 or more Utah individual income tax returns, you are required to file all eligible returns electronically or with a 2-D bar code.

Will the Tax Commission notify each practitioner who is required to file electronically based on the threshold or will it be the responsibility of the practitioner to determine if he or she is required to comply with the mandate?

It is the practitioner's responsibility to determine if they will or will not meet the mandated requirements. The Tax Commission has the right to review those instances wherein the practitioner has failed to comply with the mandated requirement.

My business has ten employees who prepare individual income tax returns. How will the Tax Commission determine whether my business is subject to the mandate?

The 101-return threshold is based on the total number of returns prepared by all of your employees. If your total business prepared at least 101 individual income tax returns, even the returns prepared by employees who did fewer than 101 returns must be e-filed.

My business has multiple locations. Does the 101-return threshold apply to each location?

No. The 101-return threshold is based on the total number of returns prepared at all of your business locations.

My tax return preparation business is located outside Utah. Does the mandate requirement apply to me?

Yes. The location of the business is not relevant in determining whether an individual income tax return preparer is required to file electronically or use 2-D bar codes. The requirement is based upon the number of Utah individual income tax returns filed. If you prepare 101 or more Utah individual income tax returns, you are subject to the mandate.

However, returns for other states are not counted when determining the threshold.

I work with a volunteer group that prepares tax returns at no cost to the taxpayer. Am I required to electronically file or use 2-D bar codes on these returns?

No. While we encourage you to participate in the electronic filing program (or use 2-D bar codes), volunteer groups are exempt from the mandate.

Is there a waiver process allowing a tax preparer to be exempt from the mandatory electronic filing or 2-D bar code requirements?

Yes. A tax preparer may request a waiver if they demonstrate the requirements place an undue hardship on them. The waiver is requested by writing the Tax Commission and must state the reasons the preparer believes he or she should be granted the waiver. The Tax Commission may waive the requirements for a period of time, usually one year.

The waiver request should be sent to:

Mandate Waiver
Utah State Tax Commission
210 N 1950 W
Salt Lake City, UT 84134

Does the mandate requirements increase the preparer's liability?

No. Under Utah law, the taxpayer is responsible for the accuracy of the information on his or her tax return and for filing it timely.

A person who preparers, presents, procures, advises, aids, assists or counsels another on a return, affidavit, claim or similar document administered by the Tax Commission, and who knows or has reason to believe it may understate a tax, fee or charge is subject to both a civil penalty ($500 per document) and criminal penalties (second degree felony with a fine between $1,500 to $25,000). See Utah code §59-1-401(9) and (10) for specific details.

How does the Tax Commission plan to enforce the mandatory requirements?

At present, there is no monetary penalty for failure to comply with this legislation. The Tax Commission will monitor compliance, however, and work with tax preparers to encourage voluntary compliance.

What if a taxpayer does not want their return filed electronically or submitted with a 2-D bar code?

A taxpayer can make the election not to electronically file or file with a 2-D bar code an eligible Utah individual income tax return. To "opt-out" of the requirements, the taxpayer must make their request in writing and that request must be kept by the tax preparer for future verification by the Tax Commission. Tax Commission TC-831, Request to Elect-out of Electronic and 2-D Bar Code Filing, may be used for this purpose, or you may design one of his own.

Even though a taxpayer requests to opt-out of electronic filing and a 2-D bar coded return, that client's paper return will still be included in the total mandate count as defined in §59-10-514.1.

Is there a penalty for not complying with the mandate?

Currently, penalties have not been defined. Legislation has been drafted to provide penalties for non-compliance in the future.

What are the requirements for signing up for the Utah electronic filing (e-file) program?

Follow these steps to be accepted as an ERO (Electronic Return Originator) into the Utah e-file program:

First, be accepted into the IRS e-file program by filing, either on paper or electronically, form 8633, Application to Participate in the IRS e-file Program. Information is available on the IRS website at http://www.irs.gov/taxpros/providers.
Once you are approved by the IRS, send or fax a copy of the IRS acceptance letter to:

Electronic Return Coordinator
Utah State Tax Commission
210 N 1950 W
Salt Lake City, UT 84134
Fax: (801) 297-7698

You are then automatically accepted into the Utah e-file program.
You must use software that has been tested and approved by the Utah State Tax Commission. Check with your software provider to ensure that their software is approved for e-filing. You may also call Doug Hansen, Utah Electronic Return Coordinator at (801) 297-7575 to check the status of your software.

You can learn more about the requirements for participation and check out some of the benefits of e-filing by obtaining Utah Pub. 59, Utah Handbook for Electronic Filers, available on our website at http://tax.utah.gov/forms.

How long does it take to get approval from the IRS and the Utah State Tax Commission?

You should allow at least 45 days for the IRS to process your application. For more information on the federal application process, visit the IRS website at www.irs.gov.

Once you have been approved by the IRS and receive your Electronic Filing Identification Number (EFIN), send or fax a copy of you IRS acceptance letter to:

Electronic Return Coordinator
Utah State Tax Commission
210 N 1950 W
Salt Lake City, UT 84134
Fax: (801) 297-7698

Utah approval is automatic once you have received approval from the IRS. You do not need to submit a separate application form to Utah.

What happens if the IRS is behind in processing e-file applications and the tax preparer does not receive his EFIN in a timely fashion?

If you do not receive your IRS Electronic Filer Identification Number (EFIN) in time to start e-filing returns, you should file returns on paper until you are accepted into the IRS and Utah e-file programs. As soon as you receive your EFIN and submitted a copy to the Tax Commission, you should begin e-filing all applicable returns.

What if a tax preparer is denied participation in the IRS e-file program?

To e-file Utah individual income tax returns, the tax preparer must be enrolled in the IRS e-file program. If a tax preparer is denied participation in the IRS e-file program, the tax preparer should use software with 2-D barcode technology.

Where can I find a list of approved software developers?

Information on approved software developers is available on both the IRS website at www.irs.gov and the Utah website at incometax.utah.gov. You can also contact the Utah Electronic Coordinator at (801) 297-7575.

How quickly will taxpayers receive their refunds when filing their Utah individual income tax return electronically?

Most refunds are mailed or deposited into the taxpayer's account within two weeks of filing, compared to four to six weeks for paper returns filed.

In some instances, additional information may be required to insure the accuracy of entries made on the return. In these cases, the filer is notified immediately and the refund is processed as quickly as possible upon receipt of the supporting information.

My clients want to review their return before they are sent. Won't electronic filing prevent this?

Since taxpayers are responsible for the accuracy of their tax returns, all taxpayers should carefully review their returns prior to sending them to the Tax Commission. This applies to returns they prepare themselves as well as to returns prepared and completed by a paid preparer. Electronic filing does not prevent the review of a completed return prior to submission.

Does the Utah State Tax Commission provide any materials I can give my clients to explain the new law?

Yes. You can access and print a copy of the law (H.B. 190) for your client at http://le.utah.gov/ . You may wish to also download the "Frequently Asked Questions for Taxpayers" for your clients.

Whom should I contact if I have questions about the new mandatory requirements?

You can email your questions on the mandate to taxmaster@utah.gov or visit our website at tax.utah.gov/taxpros/mandate.

Whom do I call for more information about the Utah e-file program?

You can email your questions on the Utah e-file program to ddhanse@utah.gov or telephone Doug Hansen, Electronic Filing Coordinator at (801) 297-7575.

Federal e-filing information is available on their website at www.irs.gov/taxpros or by calling 1-866-255-0654.

Where can I read the legislation enacting this filing mandatory requirement?

The law enacting filing mandates was passed by the 2005 legislature as H.B. 190. You can view this new law at http://le.utah.gov/.