How Tax Preparation Software is Approved for Electronic Filing

IRS requires all tax preparation software used for preparing electronic returns to pass the requirements for Modernized e-File Assurance Testing (ATS) as briefly explained below:

• IRS issues a Publication 4162 that includes a series of test tax returns and instructions.
• Software vendors notify IRS they plan to test and provide a list of forms they plan to include in their tax preparation software.  Note: IRS does not require software vendors to support all forms.  They are allowed to develop their tax preparation software based on the needs of their clients.
• Software vendors use the test tax returns to create test returns and format in the specified Extensible Markup Language (XML) format.
• The software vendor transmits the XML formatted test tax returns to IRS.
• An IRS tax examiner checks every data entry field on the return. 
  1. These checks ensure tax calculations on the test return matches the answers provided by IRS on the test returns.
  2. These checks also ensure the software correctly formats the test tax return data in XML format and the data can be successfully transmitted to, received and the tax return viewed by IRS.
• When IRS determines the software correctly performs all required functions it is approved for electronic filing.
• Software vendors are allowed to market their tax preparation software as approved for electronic filing to corporations and/or tax professionals after the approval from IRS is received.