As you prepare for the end of the year, there’s an IRS change that we want to make you aware of that may impact you when it comes time to prepare your 2023 year-end forms. The IRS has lowered the threshold by which it mandates you to file year-end forms electronically to a total of 10. This change has implications for employers and taxpayers, as it affects the way tax-related information is submitted to the IRS. This message summarizes the amendment and lays out what you need to do going forward if you will have more than 10 forms this year and prepare your own year-end forms.
What changed?
On February 23, 2023, the Treasury Department issued Treasury Decision 9972, amending Regulations Section 301.6011-2. This amendment specifically targets the threshold for electronic filing of information returns—once a business exceeds a certain number of returns, the business is required to file the returns electronically. The new threshold is now 10 returns. The new threshold goes into effect next year, which means that tax year 2023 will fall under the new rules—some of which are required to be filed no later than January 31, 2024.
Why is it changing?
The IRS has given the following reasons for the change:
- Enhanced Efficiency: Electronic filing is far more efficient and less prone to errors than paper-based filing. Lowering the threshold encourages employers to utilize electronic filing, thus contributing to smoother tax processing.
- Cost Reduction: Electronic filing can be more cost-effective for employers in the long run, eliminating the need for paper forms, postage, and manual data entry.
- Reduced Environmental Impact: Encouraging electronic filing aligns with efforts to reduce paper waste and promote environmentally friendly practices.
- Timely Filing: The amendment ensures that information returns for tax year 2023, specifically Forms W-2, are filed electronically by January 31, 2024, allowing for timely and accurate processing.
Not that this will be fun for those of you impacted by it and now required to e-file forms when you have not in the past – but at least you know why the IRS is making these changes.
What forms are affected by these changes?
The following returns fall under this new threshold:
- Forms W-2,
- All 1099 Forms, including but not limited to NEC & MISC
- Form 1042-S
- The Form 1094 series
- Form 1095-B & C
- Form 1097-BTC
- Form 1098, C, E, Q & T
- Form 3921
- Form 3922
- The Form 5498 series
- Form 8027
- Form W-2G
Filers should add together any of the above forms they need to file and if it exceeds 10, they are required to file all forms electronically!
How do I get my forms e-filed?
You always have options – when the IRS enacted this amendment, they created a free portal for businesses and individuals to E-file these returns called IRIS. This website summarizes much of what is in this message and talks about the steps to be completed to be enrolled as an IRIS user.
It should be noted that you will need to get an EIN – you cannot use an SSN when using IRIS. Obtaining an EIN is quick and easy. You also need to file for an IRIS Transmitter Control Code (TCC). This apparently can take up to 45 days – we’re hopeful the IRS will process these applications quicker. The provided links walk you through the entire process.
If all of this seems all too overwhelming, contact your CPA or a local GreenStone tax accountant. GreenStone offers a full array of accounting services for farmers and other business owners and are ready to assist you with your year-end reporting needs!
