SECTION 6. PENALTIES

.01 Penalties for Disclosure or Use of Information.

(1) An On-Line Filer, except a Software Developer that performs no other function in the Form 1040 On-Line Filing Program but software development, is a tax return preparer (Preparer) under the definition of § 301.7216–1(b) of the Regulations on Procedure and Administration. A Preparer is subject to a criminal penalty for unauthorized disclosure or use of tax return information. See § 7216 of the Internal Revenue Code and § 301.7216– 1(a). In addition, § 6713 establishes civil penalties for unauthorized disclosure or use of tax return information.

(2) Under § 301.7216–2(h), disclosure of tax return information among accepted On-Line Filers for the purpose of preparing a return is permissible. For example, an On-Line Service Provider may pass on tax return information to a Transmitter for the purpose of having an online electronic return formatted and transmitted to the Service. However, if the tax return information is disclosed or used in any other way, an On- Line Filer may be

.12 A Transmitter must include an OnLine Service Provider’s EFIN on each return that the Transmitter accepts from an On-Line Service Provider.

.13 A Transmitter must enter the letter “O” in the Trans Record “A” as the “Transmission Type Code” when transmitting the electronic portion of an online electronically filed return to the Service.

.14 A Transmitter must ensure that it does not combine, within the same transmission to the Service, the electronic portion of a return filed under the Form 1040 On-Line Filing Program with the electronic portion of a return filed under any other electronic filing program.

.15 A Transmitter must ensure that it does not use an EFIN or ETIN obtained through the Form 1040 IRS e-file Program in a transmission of the electronic portion of a taxpayer’s return as part of the Form 1040 On-Line Filing Program.

.16 If the Service accepts the electronic portion of a taxpayer’s return, the Transmitter must notify the taxpayer (as prescribed in section 5.19 of this revenue procedure) of the following:

(1) the date the transmission was accepted;

(2) the DCN; (3) where to put the DCN on Form 8453–OL; (4) the requirement to properly complete and timely submit a Form 8453–OL with accompanying paper documents (including Form W–2, Wage and Tax Statement; Form W–2G, Statement for Recipients of Certain Gambling Winnings; and Form 1099–R, Distributions From Pensions, Annuities, Retirement or ProfitSharing Plans, IRAs, Insurance Contracts, etc.) within one work day;

(5) the appropriate service center’s address to which Form 8453–OL with accompanying paper documents must be sent;

(6) that a Form 8453–OL must be received by the Service before an on-line electronically filed return is complete; and

(7) that the taxpayer’s failure to timely submit a Form 8453–OL with accompanying paper documents could result in the Service not allowing the taxpayer to file a tax return through the Form 1040 On-Line Filing Program in the future.

.17 If the Service informs the Transmitter (in an acknowledgement file) that the electronic portion of a taxpayer’s return has been rejected, the Transmitter must notify the taxpayer, as prescribed in section 5.19 of this revenue procedure, of the following:

(1) that the Service rejected the electronic portion of the taxpayer’s return;

(2) the date of the rejection; (3) what the reject code(s) means; (4) what steps the taxpayer needs to take to correct the error that caused the rejection; and

(5) the information contained in section 5.18 of this revenue procedure.

.18 If the taxpayer chooses not to have the electronic portion of the return corrected and transmitted to the Service, or if the electronic portion of the return cannot be accepted for processing by the Service, the taxpayer must file a paper return by the later of:

(1) the due date of the return; or (2) ten calendar days after the date the Service gives notification that the electronic portion of the return is rejected or that the electronic portion of the return cannot be accepted for processing. The paper return should include an explanation of why the return is being filed after the due date.

.19 A Transmitter that transmits a return of a taxpayer who is a subscriber of an On-Line Service Provider must notify the taxpayer by sending an electronic transmission to the On-Line Service Provider within two work days of retrieving the acknowledgement file. A Transmitter that transmits a return of a taxpayer who is not a subscriber of an On-Line Service Provider must notify the taxpayer by:

(1) sending an electronic transmission to the taxpayer within two work days of retrieving the acknowledgement file; or

(2) mailing a written notification to the taxpayer within one work day of retrieving the acknowledgement file.

.20 A Transmitter must make available to the Service upon request all items required by this section to be retained until the end of the calendar year in which a return was filed. The Transmitter must make this material available either at the business address of the Transmitter or from the contact representative named on Form 8633.

1998–38 I.R.B. 25 September 21, 1998

.03 The Transmitter must give the taxpayer the DCN for the taxpayer’s Form 8453–OL and instructions to the taxpayer for entering the DCN on Form 8453–OL.

.04 If a taxpayer inquires about the status of a refund, the Transmitter, or OnLine Service Provider if the taxpayer is a subscriber, must advise the taxpayer of the appropriate IRS TeleTax number to inquire about the status of the taxpayer’s refund. The Transmitter or On-Line Service Provider should also advise the taxpayer to wait at least three weeks from the date the Service acknowledged that the electronic portion of the taxpayer’s return was accepted for processing before calling the TeleTax number.

.05 The Transmitter must inform the taxpayer that the address on the electronic portion of the return, once processed, will be used to update the taxpayer’s address of record. The Service uses the taxpayer’s address of record for various notices that are required to be sent to a taxpayer’s “last known address” under the Internal Revenue Code and for refunds of overpayments of tax (unless otherwise specifically directed by the taxpayer, such as by Direct Deposit).