EFIN Dilemma

A buddy of mine who is in Tax Prep for over a decade recently reached out to me. He brought up a proposal to me were he is looking to use my EFIN to e-file returns in his office. Mainly because he is paying his cousin too much to use his EFIN. I guess they used to be partners and now he separated, but they had an agreement that he will use his EFIN for a fee per return prepared (and bank products).

I thought about it and said why not. I currently have 2 EFIN's. One is for my MMLLC (S-Corp) and my Sole Proprietor (it's active but I'm not using). I figure I'll have him use my Sole Prop EFIN but my Sole Prop name associated with the EFIN & address has to be on the bottom of the return.

I called e-services to verify this arrangement and they said "well, why not? It's just like you're opening up at another location. As long as he has a PTIN and he signs the return, it is an OK arrangement. But you have to protect yourself, you are a Sole Prop and you can't technically have an employee (I was so confused by what she meant by this)."

I haven't agreed to the arrangement as I am still reluctant about the situation, figured i'll help him and make small money at the same time. What are your thoughts/input on this?

Will my S-corp be affected if something were to happen to my Sole Prop EFIN?

I currently have 2 EFIN's. One is for my MMLLC (S-Corp) and my Sole Proprietor (it's active but I'm not using).

I thought EFINs became inactive (or expired) if you didn't efile at least five returns in the prior year?

I currently have 2 EFIN's. One is for my MMLLC (S-Corp) and my Sole Proprietor (it's active but I'm not using).

I thought EFINs became inactive (or expired) if you didn't efile at least five returns in the prior year?

It appears that you have two years to use it. If you don't use it within those years, it will be deactivated.

And why hasn't this person gotten their own EFIN?

And why hasn't this person gotten their own EFIN?

I believe there was a sour separation from his old firm where he was partnered with people and taking most of his income while he was doing most of the work. Last minute he decided to leave. Did not know how to apply for his own EFIN.

My concern would be why he does not have his own EFIN. Is he not compliant with the IRS and not eligible?

Not trying to be too harsh; I come down on the side of avoiding the situation as described in OP.

You can have friends and you can have business associates, and they do not have to be the same people.

It is clear that this person has some value to you as a friend. Fine, no need to disconnect.

It is when you say that he has been in tax prep for a decade, and then detail that he does not know how, and has not bothered to find out how, to obtain his own EFIN that all of us (seemingly) have a red flag raised.
This is a very basic step in the life of a professional, and that he refused/is otherwise unable/been too lazy/does not know how (pick one), to get his own EFIN should give you pause that he may not rise to the level of "professional", and to avoid this scenario.

I would say no, for reasons others have stated.

Usually situations like this is how friends become not-friends.

Why is he reaching out now, on February 21st?

Doesn't he realize that if he obtained his own EFIN, he wouldn't have to pay anyone to use their EFIN? That's the least "expensive" way to go about it if he's trying to reduce overhead.

It's really not that hard to obtain an EFIN. It is annoying, but it's nothing he couldn't have handled in November/December.

My concern would be why he does not have his own EFIN. Is he not compliant with the IRS and not eligible?

He just was never became a principal for a firm. The whole family run 3 different tax prep shops preparing over 3000 returns in each. I think he's had enough of it because his whole family was pocketing more money while he was bringing most of the business.

That explains why he's never had his own EFIN, not why he doesn't have one now?

That explains why he's never had his own EFIN, not why he doesn't have one now?

Yeah, I believe he has applied for an EFIN. But he decided too late that he did not want to work with his family. So he made an arrangement he would pay his cousin per return to use his EFIN. But I guess the cousin was charging him way too much, too.

So he just asked if he can use mine temporarily. I spoke with e-Services after 1.5 hour hold. They said it is OK as long as the address and company name is on the bottom of the return while exercising caution. I need to get a hold of his 8879's each day.

Did you check with your malpractice carrier to see if you would be covered in the event something goes terribly wrong?

It is very common for many paid preparers (PTIN holders) to file returns under a shared EFIN. Just think of every H&R Block office. But for non-employees to do so is less common, I think. There is an IRS pub (1345) that outlines responsibilities for Intermediate Service Providers (that's you, with the EFIN) who send returns to transmitters (the vendor, e.g. Intuit, Thomson-Reuters) on behalf of other EROs.

It is very common for many paid preparers (PTIN holders) to file returns under a shared EFIN. Just think of every H&R Block office. But for non-employees to do so is less common, I think. There is an IRS pub (1345) that outlines responsibilities for Intermediate Service Providers (that's you, with the EFIN) who send returns to transmitters (the vendor, e.g. Intuit, Thomson-Reuters) on behalf of other EROs.

This makes sense. I'll look into this.

Did you check with your malpractice carrier to see if you would be covered in the event something goes terribly wrong?

Hmmmmm - I will also look into this. This is outside of the scope of my practice. What can terribly go wrong? The only worst case scenario I can think of at the moment is my EFIN will get suspended.

Since he is still signing the returns with his PTIN, he is still liable.

Your EFIN gets suspended in the middle of spring busy season?

The thought of that alone is enough to make me firmly say "No can do".

His first post says he has two EFIN's, one of which he is not using.

Not saying I'd do it though. If family is charging him a bunch of money, maybe they are real cutthroats. Or, maybe it is a matter of balancing risk and reward.

As stated previously it is common to have PTIN holders in one location share a EFIN in multi-office organizations. But there is an employee-employer relationship. I would be very careful allowing someone else use my EFIN without a legal relationship because at the end I am responsible for any activity under my EFIN that I authorized. Best to check with your E&O carrier before something bad happens that holds you responsible for damages!

Also, check with your software vendor. I know if I had a second EFIN, I would have to pay an additional license fee to use it.

IMHO

You cant do this - this is your lively-hood.

Let him pay his ex-partner(s) as agreed until he has his own. He'll be OK.

It is not reasonable for him to be mad at you for not risking such a thing.