New E-File Rules for Business & Information Returns
Earlier this year, the IRS slipped out largely unnoticed new regulations that take effect in 2024 requiring certain businesses to electronically file (e-file) income tax and other information returns.
Previous regulations imposed a 250-return threshold before requiring e-filing of returns. The new rules reduce this threshold to generally require e-filing by filers of 10 or more returns in a calendar year. Further, they also will now require e-filing of certain returns and other documents that previously did not have to be e-filed.
In another critical change, whereas previously, the 250-return threshold applied separately to each information return type, now in determining whether you meet the 10-return threshold, you are required to aggregate almost all information return types covered by the regulation.
For example, if a business files five Forms W-2 and five Forms 1099-INT in 2024, then they must e-file all information returns during the year. But, if they file a total of less than 10 of one or more types of information returns, they do not have to e-file the information returns.
In another change for smaller corporate businesses, the regulations also eliminate the e-filing exemption for income tax returns of corporations that report total assets under $10 million at the end of their taxable year.
The new rules also require partnerships with over 100 partners to e-file information returns. In addition, partnerships that must file at least 10 returns of any type during the calendar year now must e-file their partnership return.
Interestingly, the new rules do not apply to payroll tax forms such as Form 940, 941 and 943.
In the release, the IRS said, "The Treasury Department and the IRS believe that making the new provisions for electronic filing applicable to returns and other documents required to be filed during calendar year 2024 will give affected persons ample time to prepare."
To help taxpayers, the IRS created a new, free online portal to aid in this process by helping businesses file Form 1099 series information returns electronically. The portal, known as the Information Returns Intake System (IRIS), may be especially helpful to small businesses that now mail their 1099s, the IRS said.
While there are penalties for failure to comply, the final regulations generally provide waivers for filers that would experience hardship in complying with the e-filing requirements and administrative exemptions from the e-filing requirements.