E filing required versus engagement letter

I am going out on a limb here but I need clarification. My engagement letter states that I will not efile until I receive the signed 8879's and my payment. In another forum, someone noted that the IRS prohibits stockpiling and requires that efilers transmit within 3 days of receiving a signed 8879. I am not really stockpiling in my mind as I efile every day for paid returns and send a note to non payers that I am still waiting for payment.

Any advice or clarification welcome?
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Check circular 230. I'm pretty sure there is something in there about this specific situation.

I did go through Circular 230 quickly but did not find anything. I found the stockpiling mandate under efiling procedures "Submitting the Electronic Return to the IRS".

It's not stockpiling if you cannot legally file the return. You can't legally file until the taxpayer signs. Stockpiling has an actual definition, and it is regarding the situation where the return preparer will "hold" onto returns for whatever reason. It's not really an issue for most preparers, although the IRS gave an example where a preparer was stripped of his efile license, and stockpiled returns while waiting to be reinstated. You can't do that.

In 2012, the IRS allowed stockpiling specifically because of all the late tax changes, and the IRS couldn't even process certain returns until late February. Remember that year?

I believe you can't hold the transmission of an e-file return for payment of your fee, if you have a signed 8879 form.

My engagement letter states that I will not efile until I receive the signed 8879's and my payment

A practitioner who needs pre-payment should collect it before releasing signature forms. Once the signed 8879 comes back, it must be efiled. At that point any fee dispute is a separate issue.

Hmm, I recall when I used to work at H&R (company-owned office) that returns would not be efiled until payment was received, it was built into the software. Does anyone even know what was the original problem from the early days of efiling that the anti-stockpiling rule was intended to address?

I believe you can't hold the transmission of an e-file return for payment of your fee, if you have a signed 8879 form.

The IRS e-file handbook does not say this. You can require a fee payment at the time the return is submitted for signature to the client. If the client doesn't pay, you can send them on their way with their original docs. No one can force a practitioner to file a taxpayer's return if it hasn't been paid for yet.

My learning curve is over in this respect.

I agree with TaxWriter et al...if you haven't been paid for your services, the contract between tax preparer and client hasn't been completed, nor your obligation to file, simply because the client gives you the signed 8879 or other required signed forms. Doubt stockpiling refers to unpaid returns. So it is best to avoid incorrect expectations from clients and spell out in engagement letters the payment obligation relative to efiling.

Thank you. I am feeling better that this seems to be a gray area. Since being paid before efiling is in the engagement letter as well as noted in the transmittal letter with the return copy, the client is well aware of the way things work.

You can require a fee payment at the time the return is submitted for signature to the client.

Certainly. But if one DOESN'T require a fee payment at that time, one can not accept a signed Form 8879 and then refuse to file it pending payment.

But if one DOESN'T require a fee payment at that time, one can not accept a signed Form 8879 and then refuse to file it pending payment.

Once again, the IRS e-file handbook does not say this, and does not use this verbiage.

If the above statement were true, then the client would be able to just leave the signed Form 8879 at the front desk (which we've had happen) or fax it in, (which we have ALSO had happen) and then cry to us that we were stockpiling.

If the person is a scammer they will do everything in their power to get around paying at pick-up.

Just what constitutes constructive receipt of an 8879, and what if the ERO has not yet signed it? Can the return be efiled if either of the preceding two requirements have not been satisfied?