Does your business file 10 or more information returns with the IRS? If the answer is yes, brace for a significant rule change that came into effect on January 1, 2024, impacting the 2023 tax year.
Lowered Thresholds for E-Filing
Previously, only businesses filing 250 or more information returns were mandated to file electronically. However, the threshold has now dropped from 250 to 10. Before the new rule, the 250-return threshold was applied separately to each type of information return. Now, businesses must e-file returns if the combined total of all information return types filed is 10 or more. The U.S. Department of the Treasury and the IRS issued final regulations on February 21, 2023, delineating the specifics of the new rule. Understanding these regulations is crucial for businesses adapting to the updated requirements.
Scope of the Rule Change
The IRS, receiving nearly 4 billion information returns annually, predicts this number will soar to over 5 billion by 2028. The new e-filing requirements encompass taxpayers “required to file certain returns, including partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns.”
Forms Involved: A Snapshot
Forms affected by the rule change include, but are not limited to, Forms 1099, reporting independent contractor income; interest and dividend income; retirement plan distributions; prizes and other payments; Form W-2, reporting employee wages; Form 1098, reporting mortgage interest paid for the year; and Form 8300, reporting cash payments over $10,000 received in a trade or business. For businesses filing W-2 wage statements, 1099-NEC forms for independent contractors, and other forms, the deadline for submissions to the government is January 31. Staying abreast of these deadlines is crucial for compliance.
Penalties and Exceptions
Companies required to e-file information returns but opting for paper filing may face penalties. However, filers encountering undue hardship in electronic filing can seek a waiver from the e-filing requirement by submitting Form 8508 to the IRS.
As businesses navigate this era of evolving tax regulations, this comprehensive guide provides essential insights into the recent IRS rule change, offering clarity on requirements, forms, deadlines, and potential penalties. Stay informed for seamless compliance with the updated e-filing landscape.
I have extensive experience in the preparation and planning of individual, trust, estate, and corporate tax returns; performing certified business valuations; helping clients resolve issues with the Internal Revenue Service and the Wisconsin Department of Revenue; and assisting clients with QuickBooks issues.
