The IRS has expanded the electronic filing requirement for tax and information returns starting with the 2023 tax year. Regulations finalized on February 23, 2023, stipulate that almost all returns filed on or after January 1, 2024, must be submitted electronically rather than on paper.
Under the new rules, filers with 10 or more returns of any type in a calendar year are generally obligated to file electronically, a significant change from the previous threshold of 250 returns of the same type. This requirement applies broadly to various returns, including workplace IRS information forms like W-2 and 1099 filings, employee benefit plan filings, partnership returns, corporate income tax returns, and more.
The 10-return threshold is determined by aggregating different types of forms and returns, and some filers must include entities within their controlled or affiliated service group to determine compliance. For example, Forms 1099 and W-2 must be aggregated when counting to meet the 10-or-more threshold for electronic filing.
The expanded rules also affect retirement and employee benefit plans, such as Form 5500, Form 8955-SSA, Form 5330, and various series of forms like 1094, 1095, 1099, and 5498. Corrected returns corresponding to original returns must follow the same electronic or paper filing method as the original return.
To file electronically, you must have a Transmitter Control Code (TCC). Unfortunately, the deadline to apply for a TCC was November 1st. If you have not applied for a TCC and have more than 10 returns to file, you will be forced to file paper returns and incur a penalty. The only other option you have is to file a hardship waiver.
Waivers or exemptions may be granted in cases of undue hardship, where the cost of electronic filing exceeds paper filing costs, or for religious reasons. The penalties for noncompliance vary based on the type of return and are subject to annual changes.
These new rules are generally effective for the 2023 tax year returns filed with the IRS on or after January 1, 2024.
Facing challenges with the new IRS filing rules? Mize CPAs is here to help. Contact us for guidance and assistance in making the transition to electronic filing seamless. Also, the IRS now offers a free filing website for small businesses. While the IRS site is open, there is no guarantee that the IRS will process your application in time. The IRS will review your application information and supply a written confirmation of your acceptance or rejection into the program. Keep in mind that processing times vary, the typical application will be processed within 45 business days. For more information, view this tutorial provided by the IRS.