If my client's electronically filed return is rejected, cannot be corrected and must be filed on paper, how do I document this so that there is no penalty under the electronic filing mandate?

Print out the rejection notice that includes the filing date and time and keep it with the client's records. If our Compliance Division performs an audit, be sure to show the print-out to the auditor.

In addition, on the bottom of page 2 of the client's paper return you'll find a box that the client can check to indicate that the client chooses not to file electronically.