701—8.5 (422) Electronic filing of Iowa income tax returns. Electronic filing allows individuals and businesses that meet department criteria to file their Iowa income tax returns electronically. All information is electronically transmitted. Nothing is submitted on paper unless specifically requested by the department. A taxpayer’s electronic Iowa return will include the same information as if the taxpayer had filed a paper return.
There is no statutory requirement that taxpayers file their Iowa income tax returns electronically. Taxpayers also have the option to file by paper.
	 8.5(1) Definitions. For the purpose of this rule, the following definitions apply, unless the context otherwise requires:
“Acknowledgment” means a report generated by the department and sent electronically to a transmitter via the IRS indicating the department’s acceptance or rejection of an electronic submission.
“Declaration for e-File Return form” means a taxpayer declaration form that authenticates the electronic tax return, authorizes its transmission, and consents to the financial transaction order as designated using the financial institution information provided.
“Department” means the Iowa department of revenue.
“Direct debit” means an order for electronic withdrawal of funds from a taxpayer’s financial institution account for payment to the Iowa department of revenue.
“Direct deposit” means an order for electronic transfer of a refund into a taxpayer’s financial institution account.
“E-file provider” means a firm that is assigned an Electronic Filing Identification Number (EFIN) by the IRS to assume any one or more of the following IRS e-file provider roles: electronic return originator, intermediate service provider, transmitter, software developer, or reporting agent.
“Electronic filing” means a paperless filing of the Iowa income tax return, order for financial transaction, or both by way of the IRS e-file program, also known as federal/state electronic filing (ELF/MeF).
“Electronic return originator (ERO)” means an authorized IRS e-file provider that originates the electronic submission by any one of the following methods: electronically sending an electronic tax return to a Transmitter that will transmit the electronic tax return to the IRS, directly transmitting the electronic tax return to the IRS, or providing the electronic tax return to an Intermediate Service Provider for processing prior to transmission to the IRS.
“Intermediate service provider” means the firm that assists with processing submission information between the ERO (or the taxpayer in the case of online filing) and a Transmitter.
“Online filing” means the process for taxpayers to self-prepare returns by entering return data directly into commercially available software, software downloaded from an Internet site and prepared off-line, or through an online Internet site.
“Origination of an electronic return” means the action by an ERO of electronically sending the return directly to an Intermediate Service Provider, a Transmitter, or the IRS.
“Reporting agent” means a firm that originates the electronic submission of certain returns for its clients or transmits the returns to the IRS in accordance with the IRS electronic filing procedures, or both.
“Self-select PIN signature alternative” means the taxpayer electronically signs the return with a personal identification number (PIN). The PIN is any five numbers (except all zeros) that taxpayers choose to enter as their electronic signature.
“Software developer” means an approved IRS e-file provider that develops software according to IRS and Iowa specifications for the purposes of formatting electronic returns, transmitting electronic returns directly to the IRS, or both. A software developer may sell its software.
“Stockpiling” means collecting returns from taxpayers or from other e-file providers and waiting more than three calendar days after receiving the information necessary for transmission to transmit the returns to the department.
“Transmitter” means a firm that transmits electronic tax return information directly to the IRS and routes electronic acknowledgments from the IRS (and the states) to the firm originating the electronic return.
	 8.5(2) Completion and documentation of the electronic return.
	  a.   	 All monetary amounts on the prepared return must be in whole dollars. The electronic submission must match the prepared return. The taxpayer(s) must declare the authenticity of the electronic return before it is transmitted. The department has adopted the self-select PIN signature alternative as implemented by the IRS. If the ERO elects not to use the taxpayer self-select PIN signature alternative, the Declaration for e-File Return form must be completed and signed by the preparer, ERO, and taxpayer(s). If the ERO makes changes to the electronic return after the Declaration for e-File Return form has been signed by the taxpayer(s), a new Declaration for e-File Return form must be completed and signed by the taxpayer(s) before the return is transmitted.
	  b.   	 The ERO must provide the taxpayer a copy of all forms and information to be filed. The taxpayer and ERO must retain all tax documentation for three years. The Declaration for e-File Return form and accompanying schedules are to be furnished to the department only when specifically requested.
	 8.5(3) Direct deposit and direct debit.
	  a.   	 Taxpayers designating direct deposit of the Iowa refund or direct debit of payment remitted to the department on electronically filed returns must provide proof of account ownership to the ERO. The department is not responsible for the misapplication of a direct deposit refund or direct debit payment caused by error, negligence, or wrongdoing on the part of the taxpayer, e-file provider, financial institution or any agent of the above.
	  b.   	 Once the return has been transmitted, the financial order may not be altered. The department may, when processing procedures allow, grant a taxpayer’s timely request to revoke the financial order. A direct deposit or direct debit order will be disregarded by the department if the electronic submission is rejected for any reason as indicated in the acknowledgment.
	  c.   	 The department may, when processing procedures require, convert a direct deposit order to a paper check. If a refund is deposited into an incorrect bank account, the department will issue a paper refund check once the funds are returned by the financial institution.
	  d.   	 Funds will be withdrawn from the account specified in the direct debit order no sooner than the date specified by the taxpayer. This date must occur no later than the due date when the due date has not yet elapsed. This date must specify immediate payment when the due date has already elapsed. This date will be superseded by the electronic postmark date when the date occurs prior to the electronic postmark date. The direct debit payment within the electronic submission accepted by the department that is postmarked on or before the payment due date is considered timely, provided that the direct debit payment is honored by the financial institution.
	 8.5(4) Software approval. Software developers that want to develop electronic submission formatting software for e-filing Iowa returns shall register their respective software products annually with the department. The department publishes specifications, test packages, and testing procedures. Software must pass transmission tests before the department will approve it for electronic filing of Iowa income tax returns. The department will define the test period annually.
	 8.5(5) ERO acceptance to participate. Once accepted by the IRS as an ERO for a specific tax type, the ERO is automatically accepted to e-file Iowa returns of that tax type, provided that the department offers the tax type for e-file.
	 8.5(6) Suspension of an e-file provider from participation in the Iowa electronic filing program.
	  a.   	 The department may immediately suspend, without notice, an e-file provider from the Iowa electronic filing program. In most cases, a suspension is effective as of the date of the letter informing the e-file provider of the suspension. Before suspending an e-file provider, the department may issue a warning letter describing specific corrective action required to correct deviations set forth in paragraph 8.5(6)“b.” An e-file provider will be automatically prohibited from participating in the Iowa electronic filing program if denied participation in, or suspended from, the federal electronic filing program.
	  b.   	 An e-file provider that is eligible to participate in the federal electronic filing program may be suspended from the Iowa electronic filing program if any of the following conditions occur. The list is for illustrative purposes only and is not deemed to be all-inclusive.
	 (1) 	 Deterioration in the format of electronic returns transmitted.
	 (2) 	 Unacceptable cumulative error or rejection rate or failure to correct errors resulting from the transmission of electronic returns.
	 (3) 	 Untimely received, illegible, incomplete, missing, or unapproved substitute Declaration for e-File Return forms when requested by the department.
	 (4) 	 Stockpiling returns at any time while participating in the Iowa electronic filing program.
	 (5) 	 Failure on the part of the transmitter to retrieve acknowledgments within two working days of the department’s providing them.
	 (6) 	 Failure on the part of the transmitter to initiate the communication of acknowledgments to the ERO within two working days of the department’s providing them.
	 (7) 	 Significant complaints about the e-file provider.
	 (8) 	 Failure on the part of the e-file provider to cooperate with the department’s efforts to monitor e-file providers, investigate electronic filing abuse, and investigate the possible filing of fraudulent returns.
	 (9) 	 Submitting the electronic return with information that is not identical to information on the Declaration for e-File Return form.
	 (10) 	 Transmitting the electronic return with software not approved by the department for use in the Iowa electronic filing program for the given tax type and tax period.
	 (11) 	 Failure on the part of the e-file provider to provide W-2s, 1099s, or out-of-state tax returns when requested by the department.
	 8.5(7) Administrative procedure for denial of participation or suspension of participation.
	  a.   	 When a firm has requested participation in the Iowa electronic filing program but there is reason to deny the request, the department shall send a letter to the firm advising that entry into the program has been denied. When an e-file provider is a participant in the Iowa electronic filing program but is to be suspended from the program for any condition described in subrule 8.5(6), the department will send a letter to notify the e-file provider about its suspension from the program.
	  b.   	 When the firm either disagrees with the denial of participation letter or the suspension from participation letter, the firm must file a written protest to the department within 60 days of the date of the denial letter or the suspension letter. The written protest must be filed pursuant to rule 701—7.41(17A). During the administrative review process, the denial of the firm’s participation in or the suspension of the firm from the Iowa electronic filing program shall remain in effect.
This rule is intended to implement Iowa Code sections 422.21 and 422.68.
[ARC 8603B, IAB 3/10/10, effective 4/14/10]