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IRS Makes Radical Changes to Electronic Filing Requirements for 2024

IRS Makes Radical Changes to Electronic Filing Requirements for 2024

The Internal Revenue Service (IRS) electronic filing mandate goes into effect on January 1, 2024. Let’s cover what it changes and how HR can prepare. 

 

What Is the Electronic Filing Mandate?

The IRS released guidance for employers on documents and filing requirements earlier this year. The Electronic-Filing Requirements for Specified Returns and Other Documents, or TD 9972, contains regulations for documents that are filed electronically by applicable employers. In July of 2023, TD 9972 reached a final ruling on electronic filing regulations—and HR must take note and prepare to e-file more documents than ever before.  

These documents are: 

  • partnership returns 
  • corporate income tax returns 
  • unrelated business income tax returns 
  • withholding tax returns 
  • certain information returns 
  • registration statements 
  • disclosure statements 
  • notifications 
  • actuarial reports 
  • certain excise tax returns

The electronic filing mandate follows on the heels of the Inflation Reduction Act (IRA), enacted by Congress in August 2022. This act is to evaluate current IRS practices to determine a more strategic way to administrate “the tax system and the services provided to taxpayers.”  

The IRA incorporates the 2019 legislation that impacted the management of tax forms, the Taxpayer First Act (TFA). This act reduced the number of documents an employer could file with the IRS on paper. It drove a trending shift toward the electronic filing of necessary IRS returns, such as Forms W-2, Forms 1099-series, and Affordable Care Act Forms 1094/1095–C, among others. 

 

What Is the IRS Changing for Electronic Filing in 2024?

Prior to 2024, employers could file separate types of forms on paper so long as they had fewer than 250 forms.  

For example, under the previous rule, an organization filing 235 Forms W-2 and 235 Forms 1099 could file paper forms rather than electronically since they had under 250 returns for each type of document.  

Beginning in 2024, the IRS will no longer recognize distinctions between the types of forms and has enormously reduced the threshold number from 250 to 10.  

For example, if a small employer must file three Forms W-2, four Forms 1099–DIV (Dividends and Distributions), and three Forms 941 (Employer's Quarterly Federal Tax Return), then that employer must file the ten returns electronically.  

TD 9972 substantially expands the responsibilities of employers to file ten or more IRS returns electronically. Here are the forms affected:  

  • Forms 1042–S 
  • 1094-series 
  • 1095–B and 1095–C 
  • 1097-BTC 
  • 1098, 1098-C, 1098–E, 1098-Q, and 1098–T 
  • all 1099 series 
  • Forms 3921 and 3922 
  • 5498-series 
  • 8027 
  • W–2G 
  • Forms W–2 (Wage and Tax Statement)  
  • U.S. territory Forms 499R–2/W–2PR (Withholding Statement (Puerto Rico) 
  • U.S. territory Form W–2VI (Virgin Islands Wage and Tax Statement). 

Corrections of forms must also be filed in the same manner.  

There are penalties for incorrect filing, non-filing, late filing, or incorrect information. Employers may face penalties of $290 per Form W-2, with an annual maximum of $3,532,500. For businesses with annual gross receipts of less than $5 million, the maximum is $1,117,500. Penalties change each year, so keep an eye on your IRS compliance to avoid issues.  

This mandate greatly impacts small to mid-sized businesses that do not have systems in place to file IRS returns electronically. If you rely on paper filing and have more than ten returns per year, it’s time to consider switching to an e-filing system so you can remain compliant.

 

How Can HR Fulfill Filing Requirements 

As HR at a small business, you may also be responsible for filing returns with the IRS each year. TD 9972 may drastically increase the number of returns you must file electronically, and if your business continues to grow, then the likelihood this mandate impacts you increases exponentially.  

Fulfilling electronic filing requirements may seem daunting if you’re used to doing everything on paper. However, making the necessary change to an e-filing system is not so difficult. Many HRISs offer e-filing abilities. 

For example, the all-in-one HRIS BerniePortal has a Form 1094/1095-C e-filing feature to manage Affordable Care Act (ACA) forms. All employers using BerniePortal have access to Form 1094-C and 1095-C Reporting. This feature compiles key benefits information and uses that information to populate your 1094-Cs and 1095-Cs. BerniePortal can also e-file your forms directly with the IRS. Click the demo below to learn more about BerniePortal's e-filing that keeps you compliant.  

 

Compliance Feature Demo CTA

 

Payroll companies and point solution vendors are also options. However, an HRIS is much more capable of populating all the data you need. For more information on how payroll companies and point solution systems may struggle to keep you compliant, check out our resource on e-filing IRS returns using Forms 1094/1095-C as an example. 

Electronic filing may not be feasible for your organization for a multitude of reasons. If filing electronically causes undue economic hardship, you can request Form 8508 - Request for Waiver From Filing Information Returns Electronically

The new regulations go into effect on January 1, 2024, so now is the time to prepare. 

 

Additional Resources

You can stay informed, educated, and up to date with important HR topics using BerniePortal’s comprehensive resources:

  • BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
  • BerniePortal Blog—a one-stop shop for HR industry news
  • HR Glossary—featuring the most common HR terms, acronyms, and compliance
  • Resource Library—essential guides covering a comprehensive list of HR topics
  • HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics 

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