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Adapting to the IRS’s Electronic Filing Requirements

Dec 4, 2023

As the 2023 tax season draws near, businesses must take note of a pivotal IRS update requiring that most businesses file all information returns electronically. This significant shift underscores the need for businesses to gear up in preparation for the upcoming reporting period to ensure compliance and adapt seamlessly to the electronic filing landscape.

New Electronic Filing Threshold for Information Returns

The Internal Revenue Service has updated the requirements for electronic filing of information returns. Historically companies had to file in excess of 250 information returns before they were required to file those information returns electronically. The new threshold requiring electronic filing has been lowered to 10 or more information returns.

Who Is Impacted by the Change?

This updated rule extends to businesses that issue (in aggregate) ten or more information returns.  The types of information forms that must be added together to measure against this ten or more threshold include all forms in the 1099 series, all W-2 wage statements, any Form 1042-S withholding statements, and others.  This means that for the tax year 2023, Forms W-2 must be filed electronically by January 31, 2024.

Additional Requirements and Exceptions:

Corrections for information returns, such as Forms W-2c, do not contribute to the e-filing threshold. However, consistency is key: corrected forms must be filed in the same manner as the original form. For example, if you originally filed your W-2s electronically, corrections must follow suit, and thus any corrected W-2c would also need to be filed electronically.

You’ll also need to do your homework in advance. The electronic filing of the various information returns may be submitted in different places.  For example, a company may need to e-file its W-2s through the Social Security Administration’s Business Services Online while that same company files its Form 1099 series forms through the IRS’s Information Returns Intake System (IRIS).

What Employers Need to Do

Transitioning to mandatory electronic filing could present challenges for businesses that are accustomed to paper submissions. Because of this change, it’s important for businesses to develop a plan that ensures compliance with the new electronic filing requirement. Businesses need to allocate additional resources to coordinate this efiling process, including ensuring you have the correct online access set-up in the correct systems. Even after approval in the various efiling platforms, people will need to validate the underlying data as well as ensure it is formatted and submitted correctly, making the process daunting for many.

Don’t get caught unprepared! Contact your CRI tax advisor to ensure your team is ready to understand the nuances of the updated e-filing requirements. Our team of experts is ready to help you confidently navigate the complexities of the tax landscape, ensuring your tax filings are compliant and carried out with utmost efficiency.

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