Earlier this year, the Department of the Treasury and the Internal Revenue Service issued final regulations amending the rules for filing returns and other documents electronically (e-file). The final regulations reflect changes made by the Taxpayer First Act (TFA) to increase e-filing.
There are two components of the final regulations that may affect you:
- The final regulations reduce the 250-return threshold enacted in prior regulations to generally require electronic filing by filers of 10 or more returns in a calendar year.
- The final regulations also require filers to aggregate almost all information return types covered by the regulation to determine whether a filer meets the 10-return threshold and is required to e-file their information returns. Earlier regulations applied the 250-return threshold separately to each type of information return covered by the regulations.
The types of returns to be aggregated to determine if the 10-return threshold is met include: Form 1042-S, Form 1094-series, Form 1095-B, Form 1095-C, Form 1097-BTC, Form 1098, Form 1098-C, Form 1098-E, Form 1098-Q, Form 1098-T, Form 1099 series, Form 3921, Form 3922, Form 5498-series, Form 8027, Form W-2G, and Form W-2.
The new rules apply to 2023 Forms required to be filed in 2024.
Example: ABC Company had five employees in 2023 that need to be issued Forms W-2, and it had five nonemployee contractors that need to be issued Forms 1099-NEC. Since the total of all forms is 10 or more, ABC must file its Forms W-2 and Forms 1099-NEC electronically.
Corrected information returns must be filed in the same manner as the originals.
Penalties for failing to file information returns electronically may be significant. Penalties under IRC Section 6721 may apply for non-electronic filing of information returns (Forms W-2, 1099-series, etc.) when electronic filing is required. These penalties may apply for non-filing, late filing, or incorrect information. The penalty in 2024 can be $310 per information return or up to $630 per return if the filer is intentionally disregarding the rules.
Forms W-2 can be filed electronically via the Social Security Administration’s website, and all other information returns can be filed electronically on the Internal Revenue Service’s website.