Using 2 Different EFINs in Same Tax Year - Compliance Question

Do you need to register as a business too or can you just use your personal EFIN and report on Schedule C? And is there any risk the IRS might flag you for using two different EFINs?

You don't necessarily need to formally register as a business to use your personal EFIN and report on Schedule C. Many independent tax preparers operate as sole proprietors without forming an LLC or corporation. Simply reporting the income and expenses on Schedule C is sufficient from a tax perspective. There's virtually no risk of the IRS flagging you for using two different EFINs. This is a common practice in the industry. The IRS understands that tax professionals often work in multiple capacities - as employees, contractors, or independent preparers. Just make sure both EFINs were properly obtained through the IRS e-file application process.

How does taxr.ai actually work for this kind of situation? Does it just give general advice or does it look at your specific documents and employment contracts?

I'm a bit skeptical about using AI for tax compliance issues. Did you find it gave you actual legal-quality advice? I've always thought these matters are too complex for automated systems.

It works by analyzing your specific documents and contracts. You upload your employment agreement, IRS EFIN documentation, and other relevant files, and it extracts the key details to provide personalized guidance for your situation. It identified specific clauses in my contract that were relevant to outside tax preparation work. The system doesn't just give generic advice - it provides analysis based on actual IRS regulations and precedents. While I wouldn't say it replaces legal counsel for extremely complex situations, it was definitely beyond basic automated responses. It cited specific IRS publications and revenue procedures related to EFIN usage that applied directly to my scenario.

Wait, how does that even work? Don't they just call the IRS for you? Couldn't you just do that yourself?

This sounds kinda sketchy tbh. You're telling me they somehow magically get through the IRS phone system when nobody else can? I'll believe it when I see it.

They use an automated system that navigates the IRS phone trees and waits on hold for you. Instead of you personally waiting on hold for hours, their system does it. Once they get a human IRS agent on the line, they call you and connect you directly to that agent. You save all that hold time and frustration. No, it's actually legitimate and not sketchy at all. They use technology to navigate the hold systems and wait times. The IRS phone system is overwhelmed, but Claimyr's system essentially waits in line for you. When I used it, I got connected to an actual IRS representative after about 20 minutes, when I had previously spent hours trying on multiple days without success. You still talk directly to the IRS yourself - they just handle the painful waiting part.

Did you have to get separate tax prep software for your personal EFIN work or were you able to use the same program? I'm considering getting my own EFIN but worried about doubling my software costs.

I had to purchase separate tax preparation software for my personal EFIN work. Most professional tax software licenses specifically prohibit using the employer-provided software for personal business. I ended up going with a less expensive option for my side business initially, then upgraded as my client base grew. This is definitely something to factor into your business plan. Professional software can cost anywhere from a few hundred to several thousand dollars depending on the features and number of returns you need. I found the investment worthwhile once I had about 20+ clients, but it was definitely a consideration when starting out.

You only need one PTIN. The PTIN is tied to you as the individual preparer, while EFINs are tied to the business entity that's transmitting returns. So you'll use the same PTIN on all returns you prepare, regardless of which EFIN you're filing under.

This is really helpful advice! I'm curious about the E&O insurance piece - do you have any recommendations for providers that work well for small independent tax preparers? I'm just starting to consider getting my own EFIN and want to make sure I have all the liability protection covered before I take on any clients. Also, when you mention separate banking, do you mean I should set up a dedicated business account for my personal EFIN work even if I'm operating as a sole proprietor?

For E&O insurance, I went with NATP (National Association of Tax Professionals) - they offer coverage specifically for tax preparers starting around $200-300 annually for basic coverage. Intuit also offers E&O insurance if you're using their professional software. Shop around though, as rates can vary significantly based on your expected volume and coverage limits. Regarding banking - yes, I'd definitely recommend a separate business account even as a sole proprietor. It makes record-keeping SO much cleaner, especially if you ever get audited. Most banks offer simple business checking accounts with low fees. Having that separation also helps establish the legitimacy of your independent practice and makes tax time easier when you're calculating your Schedule C income and expenses. The key is keeping everything completely separate from your employer work - separate software, separate accounts, separate client files. Makes compliance much easier to demonstrate if questions ever arise.