IRS Significantly Expands Electronic Filing Requirements

Date: January 25, 2024

New Rules took Effect January 1, 2024

The Legal Center is reminding small business owners to work with their tax professionals to ensure they are prepared for the new mandatory e-file requirements that took effect on January 1, 2024.

Under this new IRS rule, taxpayers submitting 10 or more returns, which includes W-2s and 1099s, must file most tax return information electronically. Previously, taxpayers only had to file electronically if submitting more than 250 returns.

Who needs to e-file?

Under the new requirement any taxpayer filing 10 or more information returns in calendar year 2024, including W-2s or Form 1099s, will need to electronically file the returns.

The information returns subject to this requirement are Forms W-2, W-2AS, W-2GU, W-2VI, 499R-2/W-2PR, 1042-S, Form 1094 series, 1095-B, 1095-C, 1097-BTC, 1098, 1098-C, 1098-E, 1098-Q, 1098-T, Form 1099 series, 3921, 3922, Form 5498 series, 8027, and W-2G.

How do you count to 10?

The threshold of 10 is based on the full calendar year. Taxpayers must add together all the information returns they file in each calendar year to determine whether they must e-file. For example, if you file five W-2s and five 1099-NECs you must e-file because you have a combined total of 10 information returns.

How do you e-file?

If you file 10 or more of the returns listed above in a calendar year, you will now be required to file those returns electronically as follows:

  • Form W-2

You will file Form W-2s with the Social Security Administration (SSA) Business Services Online (BSO) portal. The SSA provides a Business Services Online Tutorial, with instructions and resources for registering and setting up an account. Filing the returns electronically completes the wage reporting obligation of employers. There is no need to send additional paper documents as the SSA sends tax information to the IRS.

We encourage businesses to review the resources and materials provided on the SSA website to ensure they are registering and filing correctly. Those not wanting to go through this process may wish to retain the services of a payroll service provider.

  • Form 1099 and other information returns

You will file the 1099 series of information returns with the IRS Information Returns Intake System (IRIS). The IRS provides instructions and resources for registering and setting up an IRIS account.

Note that it may take up to 45 days for IRS approval to e-file, so don’t wait to set up your IRIS account.

  • Forms 1094/1095 – Affordable Care Act information returns

You will file Affordable Care Act (ACA) information returns, including Forms 1094/1095-B and 1094/1095-C, through the IRS ACA Information Returns (AIR) System. The IRS provides instructions and resources on AIR.

Can you opt-out?

Unlikely. The requirement to file the information forms electronically is mandatory. A business can request a waiver from the requirement by submitting Form 8508.

The Form 8508 instructions list the main reason for granting the waiver as an undue financial hardship from the electronic filing requirement. To demonstrate an undue financial hardship, a business must submit two cost estimates showing the cost to file electronically is more than doing so through other means, such as paper filing. Blocks 8 and 9 on the instructions describe this required showing in more detail.

Other reasons justifying a waiver include:

  • The business suffers a catastrophic event in a federally declared disaster area,
  • A fire, casualty, or natural disaster that affected business operation,
  • Death, serious illness, or absence of the person responsible for filing, which affected business operation,
  • Business was in its first year of establishment, or
  • The business is a foreign entity that is unable to obtain filing software or file electronically for other reasons outside of their control.

If the use of technology to file conflicts with one’s religious beliefs, then they are automatically exempt from the e-filing requirement. Advance approval from the IRS is not required. However, taxpayers in this situation should file Form 8508 in the first year to notify the IRS of the automatic exemption.

Note that the IRS may impose penalties on taxpayers required to e-file information returns but instead file them on paper.

For more information, reach out to the NFIB Small Business Legal Center at [email protected].

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