2017 Michigan Essential Services Assessment (ESA) Modernized E-file (MeF) Software Developer Guide

Transcription

1 Michigan Department of Treasury 5382 ( ) Draft 2017 Michigan Essential Services Assessment (ESA) Modernized E-file (MeF) Software Developer Guide Michigan Department of Treasury

2 Table of Contents Introduction... 3 Important Information for Tax Year ESA e-file Mandate Important Information for Tax Year State of Michigan Holiday Schedule Contact Information For Software Developers, Transmitters, and Tax Preparers Only For Taxpayers... 6 Acceptance and Participation Application to Participate Revised Application Process... 8 Software Developer Responsibilities Software Requirements Timeliness of Filing Monitoring and Suspension Validation and Acknowledgments General Information Electronic Michigan Data ESA e-file Signature Process Instructional Information Schemas and Transmission Specifications Header Data... 15

3 8.2. State Manifest Data Form-level Data Financial Transaction Data Software Acceptance, Testing, and Approval Test Package Test Results and Approval Large Taxpayers

4 Introduction Thank you for your interest in the Michigan Department of Treasury's (Treasury) Michigan Business Taxes Modernized e-file (MeF) Electronic Filing (e-file) programs. This publication covers the ESA e-file program. Software developers should use the guidelines provided in this publication along with Extensible Markup Language (XML) schemas published on Michigan s secure Web site for software developers ( in order to develop software for use with the ESA e-file program. Treasury will accept ESA returns for tax year 2017 using the Internal Revenue Service (IRS) MeF program. The transmission method is Web Service using Simple Object Access Protocol (SOAP) with attachments messaging. The return data will be formatted using XML. 3

5 Important Information for Tax Year ESA e-file Mandate Mandate Michigan has an enforced e-file mandate for ESA. Software developers producing ESA tax preparation software must support e-file for all eligible Michigan forms that are included in their software package. All ESA returns must be e-filed. Payments received will be processed and credited to the taxpayer s account even when the return is not processed. Additional information will be published on Treasury's Web sites and as it becomes available Important Information for Tax Year 2017 New for Tax Year 2017, Treasury will be supporting the Financial Transaction schema to allow ESA taxpayers to remit payment with and at the time of filing their electronic return. Testing Start Date: February 1 st, 2017 Communications regarding ESA e-file and software development will be received through the National Association of Computer Tax Processors (NACTP) Electronic Filing Committee membership listserv. Refer to the following instructions for related information when developing software programs. Essential Services Assessment Annual Return with Instructions (Form 5328) ESA Topics available at State of Michigan Holiday Schedule December 23 and 26, 2016 December 30, 2016 January 2, 2017 January 16, 2017 February 20, 2017 May 29, 2017 July 4, 2017 September 4, 2017 Christmas New Year s Eve New Year s Day Martin Luther King Jr. s Birthday Observed Presidents Day Memorial Day Independence Day Labor Day 4

6 Contact Information 3.1. For Software Developers, Transmitters, and Tax Preparers Only E-file Coordinator Program Area, Testing, File Specifications Scott Bunnell Mark Jenkins Telephone Teletypewriter (TTY) Assistance Michigan e-file Web Site Michigan Treasury Web Sites Mailing Address (TTY only) Forms, Documentation and E-file Services Michigan Department of Treasury 430 W. Allegan Street Lansing, Michigan FDES staff is not able to provide return status information or address specific taxpayer account issues. Should an error occur on the Michigan return during processing, Treasury will communicate directly with the taxpayer through Treasury s regular error resolution process. Treasury s ESA staff will, however, discuss return situations with the preparer if the appropriate authorization box has been completed on the return. Treasury does not recommend sending account specific information via . Federal and State disclosure laws require that taxpayer privacy and the confidential records that are filed with Treasury are protected. Therefore, Treasury will not send account-specific information over the Internet in response to an inquiry. For more information about the IRS MeF system status and possible delays, refer to the IRS MeF Status Page. 5

7 3.2. For Taxpayers Treasury offers a variety of services designed to assist taxpayers, and most are available 24 hours a day, seven days a week. Michigan Treasury Online (MTO) - MTO allows taxpayers to electronically register for taxes, update addresses, add or delete tax types, and pay ESA liabilities. Due to the range of e-services provided, all ESA taxpayers are encouraged to sign up for MTO regardless of whether they utilize thirdparty software to prepare and file their ESA return. Customer Contact Center ESA taxpayers who do not have Internet service may call ESA staff at Persons who have a speech or hearing impairment may call (TTY only). 6

8 7 Acceptance and Participation A software developer s participation in the ESA e-file Program constitutes their agreement to: Abide by federal and State e-file requirements. NOT release draft tax forms to the public (includes release of draft forms on a company Web site). Fully cooperate with Treasury, after notification, to promptly correct software program errors identified after completing e-file testing, and to substantiate to Treasury that the errors were corrected and customers were notified. Accept Treasury s decision whether a developer may continue to use the software program during the filing season. Notify Treasury of any critical software problems identified by the developer after releasing products to customers. Notify customers or clients of e-file mandates. Violation of these terms could result in the software company being prevented from participation in the early release and approval of tax forms and/or rejection of Michigan tax returns (electronic or paper) created by the company Application to Participate E-filing of ESA returns is available to all electronic filers who were accepted into the IRS MeF program. To participate, applicants must first apply to the IRS and be accepted. Individuals must register with IRS e-services and create a new (or revised) IRS e-file application. Individuals can contact e-help toll-free at for assistance with the IRS e- file application or if unable to register for IRS e-services. If after acceptance, a software developer has ongoing production problems, Treasury reserves the right to suspend the software developer until the problems are resolved to Treasury s satisfaction. The definitions used by the IRS of electronic filers, Electronic Return Originators (EROs), transmitters or software developers also apply for Michigan e-filing purposes. Upon receipt of completed Form 8633, the IRS assigns an Electronic Filing Identification Number (EFIN) and, if applicable, an Electronic Transmitter Identification Number (ETIN) to the applicant.

9 Upon receipt of the EFIN and ETIN (if applicable), an organization or individual interested in participating as a software developer in the ESA e-file Program must complete, sign and submit the Michigan Letter of Intent to Participate in E-file and Substitute Forms Programs (Form 4430). Completed applications should be ed to FDES at MIFormsEfile@michigan.gov. Applications are processed within one to two business days. Once processing is complete, an confirmation is sent with authorization to participate in Michigan s e-file program. Software developers producing tax preparation software for ESA will need to support e-file for all eligible Michigan forms that are included in their software package Revised Application Process If there is a change in the participant s application information on file, the participant should submit a revised Form 4430 to update their information. Updated application information may be submitted at any time during the year. 8

10 Software Developer Responsibilities 5.1. Software Requirements The proposed software must: Compute the tax year 2017 ESA return in the electronic format as specified by Treasury. Successfully complete all testing. Provide data validation, verification, and error detection to prevent transmission of incomplete, inaccurate, or invalid return information. Package and transmit each return/submission in accordance with the IRS MeF State and Trading Partners Reference Guide, IRS MeF Submission Composition Guide, and related IRS MeF publications. Retrieve acknowledgments from IRS MeF and make them available to the ERO or transmitter. Software developers must be available to correct any software errors that may occur after production begins and work closely with Treasury to follow up on any processing issues that may arise during the filing season. If the software developers must release corrected software it should be done in a timely manner and proper notification should be made to all customers. Internal Revenue Service Publications and Forms are available at Publication 3112 Publication 4162 IRS E-file Application and Participation Modernized E-File Test Package for Forms 1120/1120S/1120 Publication 4163 Modernized E-File (MeF) Information for Authorized IRS E- file Providers of Business Returns Publication 4164 Modernized E-File Guide for Software Developers and Transmitters MeF State and Trading Partners Reference Guide Michigan Department of Treasury Publications and Forms are available at 9 Publication 5383 Essential Services Assessment Preparer Handbook for Electronic Filing Programs 2017

11 Form 4430 Publication 5382 MICHIGAN Letter of Intent to Participate in E-file and Substitute Forms Programs Michigan Essential Services Assessment (ESA) Modernized E-file (MeF) Software Developer Guide 5.2. Timeliness of Filing The date the electronic return is posted and acknowledged by Treasury constitutes the receipt date of the return. Any return not acknowledged by Treasury as "accepted" is considered not filed. After an electronic return is acknowledged as accepted, it cannot be recalled, intercepted or changed in any manner. If either the ERO or taxpayer wishes to change any entries on an accepted electronic return, an amended return must be e-filed Monitoring and Suspension If after approval, a software developer has ongoing production problems, Treasury reserves the right to suspend that software developer until the problems are resolved to Treasury's satisfaction. Safeguarding the E-file Program from Abuse and Fraud All authorized e-file providers must be diligent in recognizing and preventing fraud and abuse in the e-file program. Providers with problems involving fraud and abuse may be suspended or expelled from participation in Michigan s e-file program, be assessed civil and preparer penalties, or be subject to legal action. Please refer to IRS Publication 4557, Safeguarding Taxpayer Data, A Guide for Your Business, and Publication 4600, Safeguarding Taxpayer Information. 10

12 Validation and Acknowledgments Treasury recommends that each return be run against a validating parser prior to transmission. Pre-validation is intended to identify potential error conditions and minimize the chance of receiving errors. A parser compares the XML document to the defined elements and attributes of the schemas to ensure that a well-formed document is received. Schemas provide the basic definition for the elements (what is required, field length, data type, etc.). Data integrity depends on each data element complying with the data format specifications. Michigan verifies the data by validating each return in the transmission against the schemas. If a data format error is encountered the return is rejected. Note: When an error is found during schema validation, processing is stopped at the point of error and there may be additional errors in the file that have not been identified. Treasury will generate an acknowledgment for all returns received. The acknowledgement record will be in a format approved and agreed upon by The State Tax E-Standards Group (E-Standards)). The acknowledgment for the Michigan return will be available within three business days after successful transmission of a file to the IRS. The acknowledgement will indicate the filing status. Filing Status: Accepted Rejected Electronic return was accepted and will be reviewed and processed. Electronic return was rejected. Rejections other than duplicates can be corrected and retransmitted. The ESA E-file Business Rules (rejection codes) documents are posted on the software developer secure site. Note: For tax year 2017 there are two sets of business rules one for return data and one for payment data. If a return is rejected on a return business rule, the payment will also be rejected, despite passing validation. Likewise, if a payment is rejected on a payment rule, the return will also be rejected. Treasury will perform certain checks on the return during the acceptance process. All returns are subject to Michigan audit and can be delayed in processing. 11

13 General Information Michigan s ESA e-file Program is a cooperative effort with the IRS and the E- Standards group. This developer guide discusses the policies and procedures of the ESA e-file Program and is a guide for software developers to convert Michigan tax data into the proper format for electronic filing. Using this developer guide and the ESA e-file test scenarios posted on the developer secure site, the software developer must successfully test its program with Treasury to become an approved software developer of ESA e-file returns. The forms used for forms design or photocopying will be posted on the secure area on Treasury's Web site when they are available. The IRS MeF system allows for two transmission methods. A state return can be transmitted as a Fed/State submission (linked to the federal return), or it can be transmitted as a State Standalone submission (unlinked to any federal return) using the MeF system. As the ESA return does not have a Federal component, State Standalone will be the only transmission method used. This publication does not include the requirements, procedures, etc., issued by the IRS. All IRS requirements must be followed in developing the ESA e-file Program. (See Section 5.1 for a list of the IRS Modernized e-file (MeF) Program publications.) How State Standalone E-file Works The IRS will perform minimal validation and will then pass along the entire state submission that was transmitted by the ERO/taxpayer Electronic Michigan Data Treasury will support the following forms and schedules for ESA e-file for tax year 2017: Form Title 5328 Essential Services Assessment Annual Return Treasury does not expect any attachments with the ESA Annual Return. Please send any additional information to the ESA unit as correspondence. Correspondence sent as an attachment to the return will NOT be reviewed or responded to. 12

14 7.2. ESA e-file Signature Process State Standalone Returns State Standalone returns must be signed using Form 5352 and by entering the taxpayer PIN in the software. Tax Professionals Returns are signed by entering the taxpayer PIN in the software after reading the perjury statement displayed in the software. The taxpayer PIN will be selected by the taxpayer, or the taxpayer may authorize their tax preparer to select the taxpayer PIN. Form 5352 will be printed and contain the taxpayer PIN. The tax preparer should retain the Form 5352 with their records as part of the taxpayer s printed return. Taxpayers (Online) Returns are signed by entering a taxpayer PIN in the software after reading the perjury statement displayed in the software. The taxpayer PIN will be selected by the taxpayer. Form 5352 will be printed and contain the taxpayer PIN. Taxpayers should retain the 5352 with their records. ESA State Standalone e-filings submitted without a taxpayer PIN will be rejected by Treasury. The taxpayer PIN must be entered in the software and included in the electronic file for all State Standalone filings. Do not mail Form 5352 to Treasury and do not include Form 5352 as an attachment with the e-file return. The appropriate perjury statement text must be provided to the officer/partner of the corporation/partnership prior to the presentation of fields used to enter the signature (taxpayer PIN). The screen for the taxpayer to enter their taxpayer PIN must contain the following text: 13

15 7.3. Instructional Information It would be helpful if the following instructional information was included in the appropriate location(s) in the software. The payment options available are: ACH Debit with Return. Payments may be made at the time of filing by utilizing the Financial Transaction schema. The payment information (account number, routing number, payment amount, etc.) is included as a complex element within the return XML. Treasury s banking service will withdraw the payment from the taxpayer s account after the return has been accepted. Electronic Funds Transfer (EFT). Payments may be made by EFT using ACH Credit. Information about this process is available on Treasury s Web site at Michigan Treasury Online (MTO). Taxpayers may access their account on MTO and initiate a Free EFT Debit or a Credit/Debit Card payment. A transaction fee may apply for Credit/Debit Card payments. Software Developers should stress to their customers the importance of not filing an ESA return containing parcels for which no ESA exemption has been properly claimed on Form 5278 and granted by the local assessor. Treasury correspondence pertaining to a taxpayer s ESA filing may be viewed on the taxpayer s MTO account. 14

16 Schemas and Transmission Specifications Michigan s form based schemas are available on the secure software developer Web site at The IRS maintains various schema sets that cannot be modified by the states for individual state purposes. The following sub-sections provide guidance on Michigan data that should be included in these schemas. Transmission Specifications are found in IRS Publications, Modernized e-file (MeF) Guide for Software Developers and Transmitters and MeF State and Trading Partners Reference Guide Header Data Below are the BusinessReturnHeaderState.xsd elements and values that are required for Michigan: Element Value Jurisdiction MIST TaxYr 2017 SoftwareID Must be the same as the Developer ID submitted on Form ReturnType Form5328 BusinessNameControlTxt 5328 TaxpayerPIN Self-selected by the taxpayer/preparer Header fields TaxPeriodBeginDt and TaxPeriodEndDt will not be used for ESA filings State Manifest Data Below are the State Submission Manifest elements and values that are required for Michigan: Element Value SubmissionID Must match submission ID of return submission file EFIN Electronic Filing Identification Number TaxYr 2017 GovernmentCd Must match value of Jurisdiction in the BusinessReturnHeaderState 15

17 Element StateSubmissionTyp SubmissionCategoryCd FederalEIN Value Must match value of ReturnType in the BusinessReturnHeaderState Enter CORPEP for ESA filings Must match value of EIN in the Filer section of the BusinessReturnHeaderState In addition: BusinessNameControlTxt Must match value of BusinessNameControlTxt in the Filer section of the BusinessReturnHeaderState Each State return must be submitted in the XML format specified and agreed upon by E-Standards and the state agencies. All XML data must be well formed. Packaging of data and transmission payload must be in proper format. Send data elements only if they contain data values. Do not send empty data elements (i.e., zero financial fields (unless required), unused elements, etc.). Treasury will produce an acknowledgment for each State submission. The transmitter may then retrieve the State acknowledgment from the IRS MeF system Form-level Data Form 5328, Part 4, ESA Parcel Summary : This section is intended to provide the taxpayer with a high-level summary of all parcels reported on the return; it is not included in the schema. This section should be included in the copy of the return the developer provides to the taxpayer after they have filed. Form 5328, Part 5, line 10, Personal Property Location : This element uses the USAddressType, which contains the optional child element AddressLine2Txt. Do NOT include this child element in the return. Form 5328, Part 5, lines 10, 11, and 12: If the taxpayer determines that a parcel listed on their MTO account does not belong to them, it is assumed that they will not have the information needed to complete these lines. Therefore, when a taxpayer enters reason code 01 in line 6a ( Not my parcel ) the software should enter NA in the Street and City fields of line 10, MI in the State field, and in the Zip Code field; also, enter NA on lines 11 and

18 Form 5328, Part 5, line 17a or 17b, Fair Market Value : For parcels that are not reporting Fair Market Value for every year (e.g., a 9m/9n parcel reporting for 2016, 2015, 2014, 2013, and 2006 & Prior), enter zero on line 17a or 17b. This line MUST BE COMPLETED for all years. Note: The line text on the form has been changed for The form now names this value Acquisition Cost ; the element name in the schema will NOT be changing to match this, but will remain FairMarketValue. Form 5328, Part 5, lines 19 and 20, Millage Rate and MSF ESA Resolution Millage Rate : These fields are not included in the schema. The rates should be hard-coded in the software, and updated each year as needed. Treasury will validate the calculation to verify that developers are appropriately assigning the correct millage to each year. If a developer is found to be using an incorrect millage, their software will be deactivated preventing the filing of production returns until such time as they have corrected the error Financial Transaction Data Only the <StatePayment> section of the FinancialTransaction.xsd will be used for the ESA program. Below are the elements and values that are required for Michigan. Element Value Checking or Savings Checkbox RoutingTransmitNumber No set value BankAccountNumber No set value PaymentAmount No set value IdentificationNumber FEIN AccountHolderName No set value AccountHolderType 1 for Business, 2 for Personal RequestedPaymentDate See E-file Payment Business Rules document AddendaRecord/ TaxpayerIdentification FEIN AddendaRecord/ TaxTypeCode/FTACode 020 AddendaRecord/ TaxTypeCode/ StateTaxTypeCode 45 TXPAmount/ SubAmountType T or P TXPAmount/SubAmount No set value NotIATTransaction Checkbox 17

19 18 Software Acceptance, Testing, and Approval Any software developer previously granted approval from FDES to file electronically must test annually for approval. Developers cannot release their software packages until final approval has been received from Treasury for e-file. Developers will receive a formal approval notice once e-file testing has been successfully completed. Software developers must establish a connection with the IRS before they begin testing their software with Michigan. All software packages must be tested using the ESA e-file test scenarios. We recommend software developers begin testing as early as possible, but no later than June 15, Michigan testing must be completed by July 15, Test returns may be transmitted as many times as needed Test Package The Michigan test package consists of ESA test return PDFs which are available on the secure Web site for software developers. Each test return scenario has a unique FEIN. Large Taxpayers may use their own return for testing purposes (see Section 9.3). Knowledge of tax law and tax preparation is necessary in preparing test scenarios. Developers must correctly prepare and compute these returns before transmitting tests. Refer to the following instruction books and publications for tables, worksheets, and related information when preparing test returns: Publication 5383, ESA Tax Preparer Handbook for Electronic Filing Programs The secure Web site for software developers also contains: Michigan specific XML schemas. ESA e-file Business Rules (Rejection Codes). Developers must closely follow schema requirements for each field element to ensure proper data mapping and formatting Test Results and Approval FDES staff does not review each test submission. All submissions passing schema validation and business rules will receive an automatically generated compare report showing side-by-side XML data results (developer XML data vs. Treasury expected

20 XML data). Test transmissions will be retrieved at 9:00 a.m., 11:00 a.m. (except on Tuesdays), 1:00 p.m., and 3:00 p.m., Eastern Standard time, Monday through Friday (excluding State holidays); compare results will be ed to the primary contact listed on Form 4430 within one to two hours. Mismatches will be highlighted for the software developer s review. Software developers should make any necessary corrections, then resubmit. This process will continue until all highlighted mismatches meet the acceptable mismatch criteria. Examples of data highlighted as mismatches that would be acceptable: Developer/Submission Specific Data: Timestamp, Originator, SoftwareId, SoftwareVersion, InternetProtocol, etc. Abbreviations: Street vs. St, etc. Different test data in Preparer Certification section (PaidPreparerInformation) Alternate test answers with FDES prior approval. Dollar amounts that may differ by $1 due to rounding Typing errors: Smith vs. Smitth Trailing zeroes (or absence thereof) in decimal or percentage elements The developer must then contact Treasury by to notify FDES staff of submissions that are ready for review and possible approval. Test scenarios may be manually reviewed on an individual basis or you may submit the full set of test scenarios supported by your software. Upon review, Treasury will issue a testing summary to the developer, detailing which compares have been accepted and which have been rejected. When a developer has received an accepted compare result for each test scenario supported by their software package, Treasury will submit the test files for system testing. Please allow up to an additional two business days for system testing, after which Treasury will issue a final approval Large Taxpayers Michigan uses the IRS definition for a Large Taxpayer. Large Taxpayers must follow IRS guidelines and procedures for participation in the IRS MeF program. Large Taxpayers who use proprietary software to prepare and file their tax return must test as a software developer with Michigan. Large Taxpayers who may not be required to use Treasury predefined test scenarios are required to provide a PDF copy of their return to FDES before submitting their first test transmission. This PDF will be used in lieu of Treasury s predefined test returns. Upon receipt of the PDF test return, the Large Taxpayer will follow the same process as commercial software developer testing. 19