E-file of individual returns is mandatory for returns prepared by certain income tax preparers. California law requires tax preparers who prepare more than 100 individual state income tax returns annually and prepare one or more using tax preparation software to e-file all current-year individual income tax returns.
Note: The mandatory e-file law does not apply to the filing of business or fiduciary returns.
For the purposes of this law, an “Income Tax Preparer” is defined as a person who prepares, in exchange for compensation, or who employs another person to prepare, in exchange for compensation, any return for the tax imposed.
This means, even if a person in your employ or one of your offices files less than 100 individual returns, if the total of all individual income tax returns prepared by multiple preparers or from multiple offices equals more than 100 and tax preparation software is used for one or more returns, all acceptable returns prepared are required to be e-filed.
If you reside or have an office outside California and you meet the requirements of the mandate, all California individual returns you prepare are required to be e-filed.
Note: There is no provision in the law that allows for a preparer waiver from the mandate.
What types of returns must be e-filed?
All current year individual income tax returns are required to be e-filed. Prior year, fiduciary, amended, and business returns are not required to be e-filed under the mandate.
Beginning January 2005, a $50 per return penalty may be assessed for each return filed on paper that should have been e-filed.
What if my client (the taxpayer) does not want their return e-filed?
Section 19170 of the Revenue and Taxation Code includes reasonable cause language that states reasonable cause includes, but is not limited to, a taxpayer’s election not to e-file. If your client elects not to e-file, you should record that election on the e-file Opt-Out Record for Individuals (form FTB 8454). This form allows you to record your client’s election not to e-file and should be retained with your records. Do not mail this form to FTB. If this form is not included in your software, you can download it from our Website at ftb.ca.gov.
For additional information regarding mandatory e-file, visit our Website at ftb.ca.gov and search for mandatory e-file, or contact e-Programs Customer Service at 916.845.0353, or via email at firstname.lastname@example.org.