I'm a tax professional. Why do I need to select the filer type during onboarding?

As a tax professional, once you’ve created your TaxBandits PRO account, you’ll be prompted to specify what type of filer you are and provide the necessary information. Based on your information, TaxBandits tailors your filing experience.

Tax Preparers

These are individuals or entities authorized to prepare and file tax returns for others using the taxpayer's TIN. The categories within this type include:

• Paid Preparer

• Paid Preparers may be CPAs or tax attorneys who are paid to prepare and submit tax returns on behalf of clients.
   
• Each paid preparer must have obtained a Preparer Tax Identification Number (PTIN) from the IRS. This allows them to legally prepare and file tax returns for clients.
   
• The paid preparer is required to sign the return as the preparer by specifying their PTIN.
   
• Paid preparers who file 94x forms for their clients must obtain authorization from the respective taxpayer using Form 8453-EMP.
   

• Electronic Return Originator (ERO)

• EROs are responsible for originating and transmitting e-filed returns, ensuring they are securely submitted to the IRS.
   
• EROs must be IRS-approved to file tax returns electronically. They must have obtained an Electronic Filing Identification Number (EFIN) to be authorized to transmit returns.
   
• EROs who file 94x forms for their clients must obtain authorization from the respective taxpayer using Form 8879-EMP.
   

• Reporting Agent (RA)
  • RAs file payroll-related tax returns and are responsible for handling compliance issues like timely filings and accurate payroll tax payments for their clients.
     
  • Reporting Agents who are required to file tax forms and make tax payments for their clients must obtain their authorization using Form 8655.
     
  • By submitting the 8655 forms along with the Reporting Agent’s list, i.e., the list of taxpayers for whom they are going to handle payroll filings to the IRS, Reporting Agents can obtain a 5-digit RA PIN.
     
  • This 5-digit PIN can be used as the signature authorization for the tax forms they file for the clients.
     
  • The IRS requires the reporting agents to file all the forms listed on Form 8655 (including 941 and 940 Forms) electronically unless the e-filing option isn’t available for that particular form.

 

Aggregate Filers

These are entities that file aggregate payroll tax returns (Forms 941/940) for multiple businesses using their own TIN.

• Certified Professional Employer Organization (CPEO)

  • A CPEO is a Certified Professional Employer Organization authorized by the IRS to prepare and file aggregate returns (such as 941, 940, 940/941 Schedule R, etc.) for multiple entities. 
     
  • CPEOs typically handle payroll and related taxes for businesses they partner with, ensuring compliance across the board.
     
  • CPEOs must be IRS-certified. A certification under the CPEO program allows them to assume responsibility for employment tax payments.
     
  • CPEOs must sign the aggregate return under their own TIN but are required to provide detailed records of the businesses they are filing for. 
     

• Professional Employer Organization (PEO)

  • A non-certified PEO offers similar services to a CPEO but without IRS certification. PEOs prepare and submit aggregate returns for multiple entities, managing payroll taxes for businesses that have outsourced their payroll services to them.
     
  • Unlike CPEOs, PEOs are not IRS-certified, but they still need to have proper agreements with their client businesses and must be legally authorized to prepare and submit tax returns on behalf of multiple businesses.
     
  • PEOs sign the aggregate return using their TIN, but they must maintain detailed records for each client entity.
    
     
• Section 3504 Agent
   
  • This refers to an agent authorized under Section 3504 of the IRS code to file aggregate returns for multiple employers.
     
  • Agents filing under Section 3504 must have authorization via IRS Form 2678 (Employer/Payer Appointment of Agent). This form grants the agent the ability to file tax returns and make deposits on behalf of multiple employers.
     
  • Section 3504 Agents sign the tax returns on behalf of the employers they represent, using their own TIN for submission.

 

Other Filers

This refers to an individual or entity authorized to prepare and file W-2 returns for entities that appointed them.

• Section 2678 Agent

• This refers to agents authorized under section 3504 to file aggregate returns for multiple employers.
   
• The employer must submit IRS Form 2678 to appoint a Section 2678 Agent. This form grants the agent authority to file W-2s on the employer’s behalf.
   
• The Section 2678 Agent signs the forms under their own TIN but files on behalf of the employers they represent.

 

• Common Paymaster

• This refers to a corporation responsible for handling payroll for employees working in a group of related entities.
   
• A Common Paymaster must be part of a group of related entities where employees work across multiple entities. The corporation acts as the employer for payroll purposes.
   
• The Common Paymaster files payroll tax returns and signs under their own TIN.