Electronic-Filing Requirements for Specified Returns and Other Documents, 26 CFR Parts 1, 53, 54, and 301, 88 Fed. Reg. 11754 (Feb. 23, 2023)
The IRS has finalized regulations substantially expanding mandatory electronic filing of information returns. The regulations, which were proposed in 2021 to implement statutory changes made by the Taxpayer First Act of 2019 (see our Checkpoint article), establish lower thresholds for mandatory electronic filing of the following returns affecting employee benefit plans:
Form 1094 Series; Forms 1095-B and 1095-C; Form 1099 Series; and Form 5498 Series. For returns in these series required to be filed after December 31, 2023, the threshold for required electronic filing is ten returns, determined by aggregating most information returns—including these forms and Forms W-2. Also, a partnership with more than 100 partners must file these returns electronically regardless of the number of returns. Any corrected return must be filed in the same format (electronic or paper) as the original return to which the correction corresponds. [EBIA Comment: The proposed regulations included a transition year (2022) in which the electronic filing threshold for these returns would have been 100 returns, but there is no transition period in the final regulations.]
Forms 5330 and 8955-SSA. The Form 5330 (related to certain employee benefit plan excise taxes) for any taxable year ending on or after December 31, 2023, must be filed electronically if the filer is required to file at least ten returns of any type during the calendar year in which the Form 5330 is due. The Form 8955-SSA (identifying separated participants with deferred vested benefits) for any plan year that begins on or after January 1, 2024, must be filed electronically if the filer is required to file at least ten returns of any type during the calendar year that includes the first day of the plan year.
Form 5500 Series. Filers of Form 5500 under the IRS’s rules for retirement plans must file electronically for plan years that begin on or after January 1, 2024, if they are required to file at least ten returns of any type during the calendar year that includes the first day of the plan year.
The regulations generally provide that the IRS may grant a waiver from the electronic filing requirement if the filer can demonstrate undue hardship, and may provide exemptions—for example, for religious reasons. Also, electronic filing is not required if the IRS’s systems do not support it. The preamble notes that, because Forms 5500 and 5500-SF must be filed electronically using the DOL’s EFAST2 system, no electronic filing waivers will be granted for those forms. [EBIA Comment: Form 5500-EZ is not required to be filed using EFAST2.]
EBIA Comment: As expected, these regulations vastly expand the electronic filing requirement, eliminating paper filings for all but the smallest employers. While the lower thresholds do not come as a surprise, those that have been filing on paper now need to move forward with their transition to electronic filing, paying close attention to the aggregation rules and effective dates. For more information, see EBIA’s Health Care Reform manual at Sections XXXVI.C (“Information Reporting of Minimum Essential Coverage (Insurers and Employers That Self-Insure)”) and XXXVI.D (“Information Reporting of Employer-Sponsored Coverage (Applicable Large Employers)”). See also EBIA’s Form 1094/1095 Workbook at Section X.C (“Filing Methods: Paper or Electronic”); EBIA’s 401(k) plans manual at Sections XIV.R (“Reporting Distributions on Form 1099-R”) and XXXI.M (“IRS Filings Related to Form 5500”); and EBIA’s Consumer-Driven Health Care manual at Section XVII.A (“HSA Trustee/Custodian Reporting Obligations”).
Contributing Editors: EBIA Staff.