Terry’s Tax Service recognizes the confusion tax terminology can cause a taxpayer.

Here you will find definitions of tax terms explained in everyday language. Once you start understanding these terms, you will be amazed how quickly they can become a part of your vocabulary!

Acceptance Letter - Correspondence issued by the IRS to applicants confirming they may participate in IRS e-file. See also Credentials.

Acknowledgment (ACK) - A report generated by the IRS to a Transmitter that indicates receipt of all transmissions. An ACK Report identifies the returns in each transmission that are accepted or rejected for specific reasons.

Adoption Taxpayer Identification Number (ATIN) - A tax processing number issued by the IRS as a temporary taxpayer identification number for a child in the domestic adoption process who is not yet eligible for a Social Security Number (SSN). An ATIN is not a permanent identification number and is only intended for temporary use. To obtain an ATIN, complete IRS Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions.

Authorized IRS e-file Provider (Provider) - A firm accepted to participant in IRS e-file.

Automated Clearing House (ACH) - A system that administers electronic funds transfers (EFTs) among participating financial institutions. An example of such a transfer is Direct Deposit of a tax refund from IRS into a taxpayer's account at a financial institution.

Credentials - Documentation issued by the IRS which indicates qualification of an Authorized IRS e-file Providers to participate in the IRS    e-file Program. The documentation consists of identification numbers and acceptance letters.

Declaration Control Number (DCN) - A unique 14-digit number assigned by the ERO (or Transmitter, in the case of Online Filing), to each electronically filed tax return.

Depositor Account Number (DAN) - The financial institution account to which a Direct Deposit refund is to be routed.

Direct Deposit - An electronic transfer of a refund into a taxpayer's financial institution account.

Due Diligence - Due Diligence, when used in context with the Earned Income Tax Credit (EITC), refers to requirements that income tax return preparers must follow when preparing returns or refund claims that involve EITC.

Earned Income Tax Credit (EITC) - The Earned Income Tax Credit is a refundable individual income tax credit for certain persons who work.

EITC Recertification - A requirement for a taxpayer previously denied EITC to provide additional information on Form 8862, Information to Claim Earned Income Tax Credit After Disallowance, when they file a similar EITC claim on a subsequent return.

Electronic Federal Tax Payment System (EFTPS) – A free service from the U.S. Treasury through which federal taxes may be paid. The taxpayer can pay taxes via the Internet, by phone or through a service provider. After authorization, EFTPS electronically transfers payments from the authorized bank account to the Treasury’s general account.

Electronic Filing Identification Number (EFIN) - An identification number assigned by the IRS to accepted applicants for participation in IRS e-file.

Electronic Funds Transfer (EFT) - The process through which Department of the Treasury transmits Direct Deposit refunds from the government to the taxpayer's account at a financial institution.

Electronic Funds Withdrawal (EFW) - A payment method which allows the taxpayer to authorize the U.S. Treasury to electronically withdraw funds from their checking or savings account.

Electronic Postmark - The Electronic Postmark is the date and time the Transmitter first receives the electronic return on its host computer in the Transmitter's time zone. The taxpayer adjusts the time to their time zone to determine timeliness.

Electronic Signature - Method of signing a return electronically through use of a Personal Identification Number (PIN). See also Self-Select PIN Method and Practitioner PIN Method.

Electronic Transmitter Identification Number (ETIN) - An identification number assigned by the IRS to a participant in IRS e-file that performs activity of transmission and/or software development.

Federal/State e-file - The Federal/State e-file option allows taxpayers to file federal and state income tax returns electronically in a single transmission to the IRS.

Financial Institution - For the purpose of Direct Deposit of tax refunds, the IRS defines a financial institution as a state or national bank, savings and loan association, mutual savings bank or credit union. Only certain financial institutions and certain kinds of accounts are eligible to receive Direct Deposits of tax refunds.

Financial Management Service (FMS) - The agency of the Department of the Treasury through which payments to and from the government, such as Direct Deposits of refunds, are processed.

Form Field Number or Form Sequence (SEQ) Number - The identifier of specific data on an electronic tax return record layout as defined in Publication 1346, Electronic Return File Specifications and Record Layouts for Individual Income Tax Returns.

Fraudulent Return - A "fraudulent return" is a return in which the individual is attempting to file using someone’s name or SSN on the return or where the taxpayer is presenting documents or information that have no basis in fact.
   Note: Taxpayers should not file fraudulent returns with the IRS.

Indirect Filer - An Authorized IRS e-file Provider who submits returns to IRS via the services of a Transmitter.

Individual Taxpayer Identification Number (ITIN) - A tax processing number that became available on July 1, 1996, for certain nonresident and resident aliens, their spouses and dependents. The ITIN is only available from IRS for those individuals who cannot obtain a Social Security Number (SSN). To obtain an ITIN, complete IRS Form W-7, Application for IRS Individual Identification Number.

Internet Protocol (IP) Information - The IP address, date, time and time zone of the origination of a tax return filed through Online Filing via the Internet. IRS requires Transmitters that provide Online Services via the Internet to capture the Internet Protocol Information of Online returns. By capturing this information, it transmits the location of the return’s originator with the individual’s electronic return. See Publication 1346 for additional Information.

IRS e-file - The brand name of the electronic filing method established by the IRS.

IRS Master File - A centralized IRS database containing taxpayers' personal return information.

Levels of Infractions (LOI) - Categories of infractions of IRS e-file rules based on the seriousness of the infraction with specified sanctions associated with each level. Level One is the least serious, Level Two is moderately serious and Level Three is the most serious.

Monitoring - Activities the IRS performs in order to ensure that Authorized IRS e-file Providers are in compliance with the IRS e-file requirements. Monitoring may include, but is not limited to, reviewing IRS e-file submissions, investigating complaints, scrutinizing advertising material, checking signature form submissions and/or recordkeeping, examining records, observing office procedures and conducting periodic suitability checks. IRS personnel perform these activities at IRS offices and at the offices of Providers.

Name Control - The first four significant letters of a taxpayer's last name that the IRS uses in connection with the taxpayer SSN to identify the taxpayer, spouse and dependents.

Originate or Origination - Origination of an electronic tax return submission occurs when an ERO either:

  • directly transmits electronic returns to the IRS,
  • sends electronic returns to a Transmitter or
  • provides tax return data to an Intermediate Service Provider.

Potentially Abusive Return - A "potentially abusive return" is a return

  • that is not a fraudulent return;
  • that the taxpayer is required to file; or
  • that may contain inaccurate information that may lead to an understatement of a liability or an overstatement of a credit resulting in production of a refund to which the taxpayer may not be entitled.
    Note: The decision not to provide a RAL or other bank product does not necessarily make it an abusive return.

Practitioner PIN Method - An electronic signature option for taxpayers who use an ERO to e-file. This method requires the taxpayer to create a five-digit Personal Identification Number (PIN) to use as the signature on the e-filed return.
             Note: Requires Form 8879 to be completed.

Preparer's Tax Identification Number (PTIN) - An identification number issued by the IRS which paid tax return preparers may use in lieu of disclosing their Social Security Number (SSN) on returns that they prepared. A PTIN meets the requirements under section 6109(a)(4) of furnishing a paid tax return preparer's identifying number on returns that he or she prepares. Click here obtain a PTIN..

Routing Transit Number (RTN) - A number assigned by the Federal Reserve to each financial institution.

Sanction – An action taken by the IRS to reprimand, suspend or expel from participation in IRS e-file, an Authorized IRS e-file Provider based on the level of infraction. See also Level of Infraction.

Self-Select PIN Method - An electronic signature option for taxpayers who e-file using either a personal computer or an ERO. This method requires the taxpayer to create a five-digit Personal Identification Number (PIN) to use as the signature on the e-file return and to submit authentication information to the IRS with the e-file return.

Suspension - A sanction revoking an Authorized IRS e-file Provider's privilege to participate in IRS e-file.

Transmitter - An Authorized IRS e-file Provider that transmits the electronic portion of a return directly to the IRS. An entity that provides a "bump-up" service is also a Transmitter. A bump-up service provider increases the transmission rate or line speed of formatted or reformatted information that it is sending to the IRS via a public switched telephone network.

Treasury Offset Program (TOP) - Public Law that established the Tax Refund Offset Program which permits the government to offset overpayments against delinquent child support obligations as well as debts owed to participating federal and state agencies. Treasury’s Financial Management Service (FMS) office assumes responsibility and oversight for TOP.

Warning - Written notice given by the IRS to an Authorized IRS e-file Provider requesting specific corrective action be taken to avoid future sanctioning.

Written Reprimand - A sanction for a level one infraction of the IRS e-file rules. It reprimands a Provider for an infraction but does not restrict or revoke participation in IRS e-file.

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