1. Sanction Levels for EROs
| Level | Severity | Possible Penalty | Examples |
|---|---|---|---|
| 1 | Minor/no impact on e-file quality | Written reprimand | Late form submissions, small errors. |
| 2 | Adverse impact on e-file | 1-year suspension or restricted access | Repeated Level 1 violations. |
| 3 | Severe harm to e-file system | 2-year suspension or expulsion | Fraud, identity theft, criminal acts. |
Note:
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Level 3 violations can lead to immediate expulsion (no review).
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Repeated violations escalate sanctions (e.g., Level 1 → Level 2 if ignored).
2. Administrative Review Process
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Step 1: Request review from the IRS office that issued the sanction.
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Step 2: If denied, appeal to IRS Appeals Office (except for Level 1 reprimands).
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Deadline: Must respond within 30 days or lose appeal rights.
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Exception: Level 3 sanctions (e.g., fraud) may skip review and result in immediate expulsion.
Cheat Sheet: E-File Sanctions
┌───────────────────────────────┐
│ **Sanction Levels** │
├───────────┬───────────────────┤
│ Level 1 │ Written warning │
│ Level 2 │ 1-year suspension │
│ Level 3 │ 2-year ban/expel │
└───────────┴───────────────────┘
┌───────────────────────────────┐
│ **Appeals Process** │
├───────────────────────────────┤
│ 1. Request IRS office review │
│ 2. Appeal to IRS Appeals │
│ (Must reply in 30 days!) │
└───────────────────────────────┘
Exam Tips:
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Level 3 = Worst (fraud = no appeal).
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30-day deadline to challenge sanctions.
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Repeated violations = Escalation (e.g., Level 1 → Level 2).
Mnemonic:
"1-Write, 2-Wait (1 year), 3-Expel"
(Level 1: Written reprimand | Level 2: 1-year suspension | Level 3: Expulsion).