E-File Mandate: The "11 Return" Rule

Why This Matters for the Exam

The e-file mandate is tested heavily on Part 3 of the EA exam. Expect questions about who must e-file, what forms are used for exemptions, and how to handle client refusals. The IRS has made e-filing the default method for professional preparers since 2011, and understanding the threshold and exceptions is critical.

The mandate exists to improve efficiency, reduce errors, and speed up refund processing. For tax professionals, it's not optional—it's the law.

The Legal Foundation

Under IRC §6011(e)(3), enacted as part of the IRS Restructuring and Reform Act of 1998, Congress gave the IRS authority to require electronic filing for preparers who file a certain number of returns. The original threshold was 250 returns, but this was lowered to 11 returns effective for the 2011 tax year.

This change dramatically expanded the scope of who must e-file, from large corporate firms to solo practitioners and seasonal preparers.

The "11 Return" Threshold: What Counts?

Specified Tax Return Preparer - Any tax return preparer who reasonably expects to file 11 or more individual income tax returns (Forms 1040, 1040-SR, 1040-NR) in a calendar year.

Key Rules:

1. Individual Returns Only: The mandate applies to individual income tax returns (1040 series). Business returns (1120, 1065, 1041) are NOT counted toward the threshold, though many preparers e-file them voluntarily.

2. Anticipation Test: The test is based on what you "reasonably expect" to file at the beginning of the year. If you think you'll file 12 returns but only end up filing 8, you're still subject to the mandate for that year.

3. Calendar Year Basis: The count resets every January 1. A preparer who files 15 returns in 2024 and 8 returns in 2025 is subject to the mandate in 2024 but not 2025 (assuming they don't anticipate 11+ in 2025).

4. Firm-Level Aggregation: If you work for a firm, the threshold applies to the firm's total, not your individual count. If your firm expects to file 50 returns total across 5 preparers, all 5 preparers must e-file, even if one individual only prepares 2 returns.

Exception Scenarios

The mandate isn't absolute. There are two main ways to file a paper return:

Exception #1: Client Opt-Out (Form 8948)

If a client refuses to e-file, the preparer can file a paper return by attaching Form 8948 (Preparer Explanation for Not Filing Electronically).

Critical Rules:

• The preparer does not need IRS approval to use Form 8948.
• The client's refusal can be verbal or written—there's no requirement to document the refusal beyond checking the box on Form 8948.
• The preparer should note the reason on Line 2 of Form 8948 (e.g., "Taxpayer declined electronic filing").

Common Exam Trap: Students often confuse Form 8948 (client refusal) with Form 8944 (preparer waiver). Remember: 8948 = Client, 8944 = Preparer.

Exception #2: Preparer Hardship Waiver (Form 8944)

If the preparer cannot e-file due to undue hardship, they can request a waiver by filing Form 8944.

Examples of Valid Hardship:

• Geographic location with no reliable internet access.
• Technology issues (e.g., incompatible software, failed IRS systems).
• Recent natural disaster affecting the preparer's office.

Critical Rules:

• Form 8944 requires IRS approval before you can paper file.
• The waiver is specific to a tax year, not permanent.
• Hardship waivers are rare—the IRS expects preparers to invest in technology.

Comparison Table: Form 8948 vs. Form 8944

Real-World Scenarios

Scenario 1: The New Solo Practitioner Jane opens her own tax prep business in January 2024. She expects to prepare 15 returns this year. In February, she prepares her first return for a client who insists on paper filing.

• Question: Must Jane e-file the client's return?
• Answer: No. Jane can attach Form 8948 (client refusal) and paper file this return. However, for all other clients who don't refuse, she must e-file.

Scenario 2: The Seasonal Preparer Mark works part-time as a preparer at H&R Block. Individually, he prepares only 6 returns, but the firm prepares 200+ returns.

• Question: Is Mark subject to the e-file mandate?
• Answer: Yes. The firm's aggregate total exceeds 11 returns, so Mark must e-file all his assigned returns (unless a client opts out via Form 8948).

Scenario 3: The Rural Preparer Sarah operates a small practice in a rural area with unreliable internet. She files Form 8944 requesting a hardship waiver.

• Question: Can Sarah paper file immediately?
• Answer: No. She must wait for IRS approval of Form 8944 before paper filing. If denied, she must arrange for e-filing (e.g., drive to a location with internet).

On the Exam

Expect 2-3 questions on the e-file mandate, typically focusing on:

1. Threshold Questions: "A preparer expects to file 12 returns. Must she e-file?"
2. Exception Questions: "Which form is used when a client refuses to e-file?"
3. Firm vs. Individual: "A preparer at a firm files 5 returns individually, but the firm files 30 total. Is the preparer subject to the mandate?"

The key is to remember: 11+ returns = Must e-file, with exceptions for client refusal (Form 8948) or preparer hardship (Form 8944 with IRS approval).