Completion of the Filing Process · Electronic filing
Levels of infractions
tax year · reviewed 2026-08-19 · I. Ohu
The rule
The IRS may sanction any provider where the firm or any of its Principals or Responsible Officials fails to comply with any requirement or provision of Publication 3112, Publication 1345, or the other publications and notices governing IRS e-file — and it may sanction for the same reasons it would deny an application in the first place. The sanctions available are a written reprimand, suspension, or expulsion, chosen according to the seriousness of the infraction.
Seriousness is graded on a three-level scale, and the grading turns on a single criterion: the effect on the quality of electronically filed returns or on IRS e-file itself.
- Level One — violations that, in the opinion of the IRS, have little or no adverse impact on the quality of electronically filed returns or on IRS e-file. The IRS may issue a written reprimand or other sanctions.
- Level Two — violations that have an adverse impact. Level Two expressly includes a continued Level One infraction after the IRS has brought it to the provider’s attention. A Level Two infraction may result in suspension for one or two years depending on severity.
- Level Three — violations that have a significant adverse impact. Level Three expressly includes a continued Level Two infraction after notice. It may result in suspension for two years or, depending on severity — the publication names identity theft, fraud and criminal conduct — in immediate suspension or expulsion without the opportunity for future participation. The IRS reserves the right to suspend or expel prior to administrative review for a Level Three infraction.
The escalation clause is the structural point. A minor violation left uncorrected after the IRS has pointed it out is not still a minor violation; it becomes a Level Two, and a Level Two left uncorrected becomes a Level Three. Nothing about the underlying conduct has to worsen.
Current figures
| Item | Value |
|---|---|
| Levels of infraction | 3 — Level One (little or no adverse impact), Level Two (adverse impact, including a continued Level One infraction after it was brought to the provider's attention), Level Three (significant adverse impact, including a continued Level Two infraction after notice)TY2026 |
| Ordinary suspension period | one or two years from the effective date of the sanction, depending on the severity of the infractionTY2026 |
| When a sanction takes effect | 30 days after the date of the letter informing of the sanction, or the date the reviewing office or the Independent Office of Appeals affirms it, whichever is laterTY2026 |
| Reconsideration after expulsion | five years from the date the firm was expelled, or five years after the individual completed rehabilitationTY2026 |
How it works in practice
A warning letter is likely but not guaranteed. Publication 3112 provides that before imposing a more stringent sanction the IRS may issue a warning letter describing the specific corrective action required — and that it may also sanction without issuing a warning letter. A practice that plans on getting a warning first is planning on a discretion, not a right.
Suspension is not permanent, expulsion nearly is. Suspended providers and individuals are usually ineligible to participate for one or two years from the effective date, and may reapply after resolving the suitability issues. Individuals of expelled firms may be eligible for reconsideration after five years — measured from the date the firm was expelled, or five years after the individual completed rehabilitation, the publication’s examples being incarceration, parole, probation and restitution.
A sanction spreads to related applications. Where a firm, Principal or Responsible Official is suspended or expelled, all other e-file applications involving the same individuals may be subject to the same sanction. A Responsible Official who sits on three firms’ applications takes all three down.
The IRS may publish the name. Publication 3112 reserves the right to list in the Internal Revenue Bulletin, in newsletters or in other media the name and owner of any entity suspended, expelled or revoked, with the effective date. The reputational consequence is separate from the operational one and is not subject to the administrative review process.
Circular 230 runs alongside, not instead. An e-file sanction is an administrative consequence of programme participation. The same conduct may also be disreputable conduct reaching the Office of Professional Responsibility (Circular 230 § 10.51), and may separately support preparer penalties. None of these forums waits for the others.
The reprimand that was filed and forgotten
A firm receives a written reprimand for consistently omitting a required entry that causes rejects downstream. The office manager reads it, notes that a reprimand carries no immediate consequence, and does not change the workflow. Two seasons later the same omission is still happening.
The original violation was plausibly a Level One — little or no adverse impact — and drew the mildest sanction available. What it is now is a Level Two, because a continued Level One infraction after the IRS brought it to the provider’s attention is a Level Two, and a Level Two may result in suspension for one or two years. Nothing about the conduct changed; the notice did. The reprimand was not a filing to be archived, it was the last cheap opportunity to fix the process.
Immediate expulsion, and the argument that came too late
An investigation concludes that a Responsible Official filed returns using stolen identities. The firm expects to make its case before anything happens.
It will not get that sequence. Level Three infractions include identity theft, fraud and criminal conduct, and Publication 3112 expressly reserves the right to suspend or expel prior to administrative review for a Level Three infraction. An immediate sanction remains in effect during the administrative review. The firm’s arguments will be heard, but the EFIN will already be gone — in the middle of a season, if that is when the determination lands.
One person, three firms
Théodore Baptiste-Sørensen is a Responsible Official on his own practice’s e-file application and, as a favour, on the applications of two friends’ firms. He is suspended following a suitability failure arising from his own unfiled personal returns.
The consequence is not confined to his practice. Where an individual is suspended or expelled, all other e-file applications involving that individual may be subject to the same sanction. Two other firms now face suspension for a compliance failure that was never theirs. Being named as a Responsible Official is not a courtesy; it is an exposure that runs in both directions, and it should be treated as a decision rather than a favour.
How this has changed
The three-level structure has been the framework since Revenue Procedure 2007-40 set out the IRS e-file programme requirements, and Publication 3112 has restated it in substantially the same terms since. What has moved is where the serious cases come from: the Level Three examples the publication now names are identity theft, fraud and criminal conduct, reflecting a decade in which refund fraud rather than transmission quality has been the programme’s central risk.
The continuous suitability process, described in the monitoring section of the same publication, has also changed the practical rhythm. Suitability was once checked at application; it is now monitored on an ongoing basis for changes affecting eligibility, which means a compliance failure that would formerly have surfaced at a renewal now surfaces when it happens.
Exam focus
Know that there are three levels, and know the criterion that separates them: the degree of adverse impact on the quality of electronically filed returns or on IRS e-file. Know that a continued infraction after notice moves up a level. Know the three sanctions — written reprimand, suspension, expulsion — and that suspension is usually one or two years while expulsion carries a five-year reconsideration period. Know that a Level Three infraction may result in suspension or expulsion before any administrative review.
Check yourself
1. How does the IRS categorise the seriousness of an e-file infraction?
A. By the dollar amount of tax involved B. By Levels One, Two and Three, according to the adverse impact on the quality of electronically filed returns or on IRS e-file C. By the number of returns the provider files annually D. By whether the provider is an ERO or a transmitter
Answer: B.
2. A provider continues a Level One infraction after the IRS has brought it to the provider’s attention. What is the result?
A. It remains a Level One infraction B. It becomes a Level Two infraction C. It becomes a Level Three infraction D. It is disregarded if unintentional
Answer: B. A continued Level Two after notice likewise becomes a Level Three.
3. Which sanction cannot be appealed through the administrative review process?
A. An immediate suspension B. A proposed expulsion C. A written reprimand D. A recommended suspension
Answer: C. Reprimands carry no immediate consequence, so no review is available.
4. A Level Three infraction involving identity theft is established. What may the IRS do?
A. Only issue a written reprimand pending review B. Suspend or expel the provider before administrative review C. Take no action until the administrative review is complete D. Refer the matter to the Tax Court
Answer: B. The IRS expressly reserves that right for Level Three infractions, and an immediate sanction remains in effect during the review.
5. After how long may an individual expelled from IRS e-file be reconsidered?
A. One year B. Two years C. Five years from expulsion, or five years after completing rehabilitation D. Never
Answer: C.
Change log
- Initial draft against Publication 3112 (Rev. 11-2025).