Comprehending Electronic Return Originators | Their Functions, Duties & Major Differences

Technology has changed the game in how tax returns are prepared and submitted. The electronic filing process has made it possible to submit tax returns via the internet. One of the key players in this process is an Electronic Return Originator (ERO). But what is an ERO, and how do they differ from paid preparers? What is their role, and who signs the ERO signature? In this article, we will try to provide answers to these questions while shedding light on the roles of EROs in the process of electronic filing of tax returns.

What is an Electronic Return Originator (ERO)?

An Electronic Return Originator (ERO) is a person or business that the Internal Revenue Service (IRS) authorizes to e-file tax returns for taxpayers. EROs are integral to the e-filing system because they ensure that tax returns are properly prepared, signed, and filed with the IRS. 

Eros are usually tax specialists like accountants, EROs, tax preparers, or enrolled agents who have met the IRS criteria to be part of the e-file program. They act as a bridge between the taxpayers and the IRS so that tax returns can be filed without unnecessary delays.

What is the Difference Between an ERO and a Paid Preparer? 

Even if an external regulatory organization (ERO) and a paid preparer are both involved in a certain area of a tax return, they differ in quite a number of responsibilities. This list highlights the main differences between the two: 

Scope of Work: 

ERO: An ERO’s responsibilities alter when it comes to the electronic filing of tax returns as they are the only individuals permitted to e-file tax returns. In this case, their focus shifts to ensuring that the return is electronically completed, signed, and sent to the IRS. 

Paid Preparer: A paid tax preparer has the capability of either electronically filing or manually filing a tax return. Thus, they are in charge of the tax return’s preparation regardless of the type of filing employed. 

Authorization: 

ERO: In order to become an ERO, there are certain requirements one has to fulfill such as applying for an EFID and going through requisite training courses. 

Paid Preparer: Paid preparers do not need an EFID number in case a return is filed under their name. Nevertheless, applying for a PTIN number to electronically prepare tax returns for a fee is a legal prerequisite. 

E-Filing Expertise: 

ERO: IRS systems compliant EROs have the knowledge and skill to electronically file returns through certain software interfaces, which enable compliance with e-file mandates for the IRS.

Paid Preparer: A paid preparer’s knowledge of e-filing will depend on their particular education and experience.

Interaction with Taxpayers:

ERO: In the case of EROs, they often deal directly with taxpayers to get the necessary documents, confirm information, and capture the signature needed for e-filing purposes.

Paid Preparer: A paid preparer specializes in the assembling of the tax return using the details provided by the taxpayer. 

Who Signs the ERO Signature? 

The ERO signature plays an important role in the e-filing procedure. An ERO signature certifies that an ERO has prepared the tax return, confirmed the taxpayer’s identity, and substantiated, to the best of their ability, the accuracy of the information to be submitted to the IRS.

The ERO signature process follows these steps:

Taxpayer Signature: 

For the ERO to electronically file the return, the taxpayer has to sign the return or endorse it by signing form 8879, the IRS e-file Signature Authorization form.

ERO Signature: 

After getting the taxpayer’s signature, the ERO adds their signature to the return with their Electronic Filing Identification Number (EFIN), thereby confirming that the ERO has followed all IRS e-file regulations.

Transmission to the IRS:  

As soon as both signatures are collected, the ERO sends out the return using an approved e-file software suite.   

What Are Electronic Returns?  

Electronic returns are defined as tax returns that are created and filed out with the IRS electronically instead of on paper. E-filing comes with more than a few benefits compared to traditional paper filing, such as:  

Faster Processing:  

Electronic returns are processed much quicker than traditional paper returns, resulting in quicker refunds for taxpayers.   

Increased Accuracy:  

Returns filed through e-file software have built-in error checks, minimizing the possibility of mistakes on the return.   

Convenience:  

Taxpayers no longer have to send out physical documents as they can e-File from the comfort of their home or office.  

Confirmation of Receipt:   

Taxpayers have the comfort of knowing their return has been filed and accepted as the IRS provides a confirmation of acknowledgment for e-filed returns.   

What Are the Responsibilities of an ERO?  

An ERO Authorized e-file provider has several important responsibilities, these includes:  

Verifying Taxpayer Identity:  

The ERO is required to confirm the identity of the taxpayer using primary representative identification such as a driver’s license or passport.

Accuracy Verification:

The ERO makes sure that all the information in the tax return is correct and ready to go before sending it to the IRS.

Obtaining Signatures:

The taxpayer’s signature is needed along with the ERO’s stamped signature on the return with the EFIN.

Maintaining Records:

Financial records including tax returns and signatures have to be kept for a certain length of time, commonly for about three years.

Complying with IRS Regulations:

All rules linked to data protection and privacy crisis must be complied with by the ERO.

Providing Support:

EROs have the responsibility of clearing or correcting returns in question or serving IRS notices.

Benefits of Using an ERO:

The ERO is beneficial to taxpayers because of the following reasons:

Expertise and Experience:

Accuracy and compliance with IRS standards is guaranteed by EROs’ deep understanding of e-filing.

Faster Refunds:

The processing of e-filed returns is faster, meaning the taxpayer will be refunded quicker.

Reduced Errors:

Advanced software used by EROs reduce the risk of errors on tax returns and identity theft.

Convenience:

EROs have taken the e-filing process completely off the taxpayer’s hands, making it simple for them to fulfill their tax duties. Security: Negative security breaches which could lead to exposing the taxpayer’s information is prevented as EROs implement strict security measures due to their network data policies. Challenges Faced by EROs While EROs manage a positive proportion of the tax filing process, they do face a number of challenges such as: Keeping Up with Regulations: The evolution of taxation law as well as e-filing or e-return service provisions alters at a rapid pace, meaning an ERO needs to keep ahead of most rules and policies. Data Security Risks: EROs have to safeguard his or her taxpayer information against cyber crime activities like hacking or information theft. Managing High Volumes: EROs often face an exceptionally high influx of returns during tax season which can prove to be stressful as well as time consuming. Dealing with Errors: EROs have to contend with the issues of addressing and re-filing tax returns besides trying to ensure that errors do not happen in the first place. Conclusion EROs are the unsung heroes of the e-filing system. Without them, taxes would be a pain and people would struggle to get their tax refunds. It’s necessary to know how EROs operate, what tasks they complete, and how their functions differ from those performed by paid preparers for electronic tax filing.

If you’re a taxpayer who needs to file their return electronically or a pro thinking about becoming an ERO, this guide covers everything for electronic tax filing. The technology may change, but the EROs will always be important for the effortless tax filing experience.