1040 e-file disaster averted: How to meet the filing deadline when your tax return has been rejected

Procrastinators beware! Just because you e-filed your tax return before Midnight on April 18, that doesn't mean your tax return is timely filed. The IRS can take up to two days to formally accept the electronically filed tax return once the return is dispatched. What should you do if you e-filed a tax return before the clock struck 12, but then the next day, after the filing deadline has passed, you receive a rejection notice from the IRS stating that the e-filed return was not accepted?
 
Don't panic! The IRS understands that a rejection can arrive after the filing deadline and has created procedures for making sure your tax return can still be filed without a penalty for late filing. According to the IRS Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns, there are a few steps that the ERO [Electronic Return Originator - i.e. the person or firm that e-filed the return] should follow.
 
Step 1: "If the IRS rejects the electronic portion of a taxpayer’s individual income tax return for processing, and the ERO cannot rectify the reason for the rejection, the ERO must take reasonable steps to inform the taxpayer of the rejection within 24 hours."
 
Step 2: "When the ERO advises the taxpayer that it has not filed the return, the ERO must provide the taxpayer with the reject code(s) accompanied by an explanation." The reject code referred to here is provided by the IRS on the rejection notice that the ERO receives.
 
Step 3: "If the taxpayer chooses not to have the electronic portion of the return corrected and transmitted to the IRS, or if the IRS cannot accept the return for processing, the taxpayer must file a paper return. In order to timely file the return, the taxpayer must file the paper return by the later of the due date of the return or ten calendar days after the date the IRS gives notification that it rejected the electronic portion of the return or that the return cannot be accepted for processing. Taxpayers should include an explana­tion in the paper return as to why they are filing the return after the due date."
 
As you can see, the IRS essentially provides the taxpayer/preparer a 10-day extension for filing the tax return when the electronic filing process fails. As long as the tax return is filed within this time frame, a late filing penalty does not apply.

 

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