Final regulations implement the Taxpayer First Act by requiring you to e-file all your information returns—your W-2s, 1099s, 1095s, and other information returns—if you’re filing a combined total of at least 10 returns, beginning with returns filed next year.
The TFA also includes a knock-on provision, which requires you to e-file other returns. The final regs set the effective date for this provision at returns required to be filed for taxable years ending on or after Dec. 31, 2023.
The IRS has now issued guidance on waivers and administrative exemptions from these e-filing requirements.
Hardship waivers and administrative exemptions
Waivers from e-filing your information returns may be granted in cases of undue hardship. This isn’t a new standard. You may qualify for a hardship waiver if the cost of e-filing exceeds the cost of filing on paper.
Exemptions from e-filing will be allowed for filers whose religious believes conflict with using the technology required to e-file. This is a new standard. These filers should notify the IRS that they qualify for a religious exemption in advance of filing returns and other documents by filing a Form 8508. After filing Form 8508, filers who qualify for a religious exemption should file returns and other documents on paper.
Heads up for corporate returns
The final regulations require partnerships with at least 100 partners, S corps and C corps to e-file their income tax returns if, during the calendar year ending with or within the entity’s taxable year, they’re required to file at least 10 returns of any type, including income tax returns, Forms 941 and 940, and information returns.
In addition, all members of a controlled group of corporations must e-file their 1120s if the aggregate number of returns required to be filed is at least 10.
Similar hardship waivers and administrative provisions apply to e-filing corporate income tax returns and Forms 1120 and 1120-S. In applying these provisions, the IRS had to obsolete old provisions on hardship waivers and corrections to e-filed returns.
The procedure for requesting a waiver from e-filing Forms 1120 and 1120-S is available in IRS revenue procedures, publications, forms, instructions, or other guidance, including postings to the IRS’ website. Updates will be available in the same way.
Finally, instructions on timely filing and correcting returns the IRS’ system has rejected during attempts to e-file may be found in IRS publications specific to each of its electronic filing systems:
- Publication 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters.
- Publication 5717, Information Returns Intake System (IRIS) Taxpayer Portal User Guide.
- Pub. 5165, Guide for Electronically Filing Affordable Care Act (ACA) Information Returns.
- Pub. 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G.
- Pub. 42-007, Specifications for Filing Forms W-2 Electronically (EFW2).
Such a low mandatory e-filing threshold means almost every business will be e-filing their income tax returns.
Since the bulk of the returns counted to determine whether you’re a mandatory e-filer are information and payroll returns, you need to take the lead and inform other departments of their new e-filing mandate.