In February, 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). These regulations will require certain filers to e-file beginning in 2024.
T.D. 9972 affects filers of 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. The final regulations reflect changes made by the Taxpayer First Act (TFA) to increase e-filing without undue hardship on taxpayers.
Specifically, the final regulations:
- Reduce the 250-return threshold to generally require electronic filing by filers of 10 or more returns in a calendar year. The final regulations also create several new regulations to require the e-filing of certain returns and other documents not previously required to be e-filed.
- Require filers to combine almost all information return types covered by the regulation in determining 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.
- Eliminate the e-filing exception for income tax returns of corporations that report total assets under $10 million at the end of their taxable year.
- Require partnerships with more than 100 partners to e-file information returns, and require partnerships that need to file at least 10 returns of any type during the calendar year to e-file their partnership return.
To help with this process, the IRS created a new, free online portal to help businesses file Form 1099 series information returns electronically. Known as the Information Returns Intake System (IRIS), this free electronic filing service is secure, accurate and requires no special software. Though available to any business of any size, IRIS may be especially helpful to any small business that currently sends their 1099 forms on paper to the IRS.
In recent years there has been tremendous growth in the availability of e-file services and the use of e-file across the tax filing spectrum. In 2021, about 82% of all corporate income tax returns were e-filed, and almost 90% of partnership tax returns were e-filed. Further reducing the volume of paper returns filed frees up staff and resources to enhance services for taxpayers and improve overall efficiencies while reducing postage, printing, shipping and storage with their associated costs and burdens.
The IRS receives nearly 4 billion information returns per year and expects to receive nearly 5 billion by 2028. In 2019, the IRS still received nearly 40 million paper information returns, even though approximately 99% of all information returns for that year were e-filed.
The final regulations generally provide hardship waivers for filers that would experience hardship in complying with the e-filing requirements and administrative exemptions from the e-filing requirements to promote effective and efficient tax administration.
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