The IRS has finalized mandatory e-filing rules. These rules reduce the number of returns a taxpayer may file without being required to file them electronically from 250 in 2023 to 10 in 2024 and beyond. (IR 2023-31; TD 9972; 2/21/2023)
Proposed regs.
On July 23, 2021, the IRS published proposed electronic-filing rules for partnership, corporate income tax, unrelated business income tax, withholding tax and information returns, as well as certain registration and disclosure statements, notifications, actuarial reports and certain excise tax returns. These proposals were required by changes to the Code made by the Taxpayer First Act (PL 116-25).
Under the proposed regs, the electronic-filing rules generally applied to returns required to be filed during calendar years beginning after the publication of the final rules. See IRS issues proposed electronic filing regs (07/22/2021).
Final rules.
After reviewing comments on the proposed regs, the IRS concluded that the new e-filing rules would apply to returns and other documents required to be filed in calendar year 2024. According to the IRS, this delayed application date will give affected filers ample time to prepare for the transition to e-filing.
For employee plans, the final e-filing rules will apply for plan years that begin on or after January 1, 2024. For fiscal year taxpayers, the final rules will apply to returns required to be filed for tax years ending on or after December 31, 2023, instead of July 31, 2022, as proposed.
In addition, the applicability date in the final rules doesn’t apply to exempt organization returns required to be electronically filed under section 3101 of the TFA. Section 3101 of the TFA requires e-fling by all tax-exempt organizations filing statements or returns in the Form 990 series or Form 8872, Political Organization Report of Contributions and Expenditures. Therefore, the 2024 applicability date in the final rules doesn’t apply to these filers.
Under the final rules, the IRS will continue to grant hardship waivers to small businesses that are paper information-return filers and those who need to file corrected information returns. Filers would be able to request a hardship waiver if an intervening event or the cost to purchase e-filing software for corrected information returns would cause a filer undue hardship. The IRS will also grant reasonable-cause relief from penalties for failure to e-file returns in “appropriate cases.”
Note. The IRS recently launched its own information return e-filing portal, the Information Returns Intake System (IRIS). See IRS Launches Form 1099 E-File Portal (01/26/2023). This portal allows filers to upload from one up to one hundred Forms 1099 per submission. To use this platform, a filer needs to obtain from the IRS a Transmitter Control Code (TCC).
While obtaining a TCC may pose problems for non-U.S. filers due to identity authentication issues, the final rules don’t adopt a blanket e-filing exception for such filers. Instead, the IRS will develop alternative identity authentication requirements using standards from the U.S. National Institute of Standards and Technology (NIST).
The final regs also:
- require filers to aggregate return types covered by the regs when determining whether the filer meets the 10-return threshold and, therefore, is required to e-file their information returns.
- eliminate the e-filing exception for income tax returns of corporations that report total assets under $10 million at the end of their tax year, and
- require partnerships with more than 100 partners to e-file information returns, and they require partnerships required to file at least 10 returns of any type during the calendar year to e-file their partnership return.
For more information about e-filing information returns, see Checkpoint’s Federal Tax Coordinator ¶S-1302.
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