Last year, the IRS issued new regulations dictating how businesses file their tax paperwork. Beginning 2024, nearly all businesses will have to file electronically. It isn’t limited simply to tax returns. Any business that files at least ten forms with the IRS in aggregate are now required to do so electronically.
Mandatory e-filing applies to Forms 1099, W-2, 1094, 1095-C, and others. It is now required thanks to TD 9972, the official final rule implemented by the IRS to carry out Section 2301 of the Taxpayer First Act of 2019.
You can learn more about the rules here. Needless to say that your company is just about out of time to prepare for e-filing if you haven’t already done so. Companies currently working with payroll or HR outsourcing partners probably have their bases covered.
Down From 250 to 10
When the Taxpayer First Act was passed some five years ago, Washington made it clear that they intended to reduce the amount of physical paperwork involved in tax reporting. They pursued electronic filing gradually, originally allowing companies with fewer than 250 filings to continue doing so with paper. But that number has now been reduced to ten.
In addition, the old 250 rule applied to each different return type separately. A company could file with paper even if it had to file 249 W-2 forms and 100 1099s. But that has also changed. The new rule forces businesses to combine all forms of the same type for the purposes of determining whether e-filing is necessary or not. A total of ten or more requires electronic filing.
Forms for Previous Years
It is important to note that the new rule only affects forms that need to be filed in the 2024 calendar year or later. Forms that would have been filed in previous years are exempt. Therefore, if your company still has outstanding forms from 2023 or earlier, the 250 rule still applies.
In addition, all corrected forms must be filed in the same manner as the original forms. If your company filed paper documents last year and some of them need to be corrected, the corrected forms should also be paper. If you filed electronically last year, your corrections should be filed electronically.
Time to Outsource Payroll
We are guessing the new rules are going to catch a lot of companies off guard. These are companies that continue to handle payroll in house. If this sounds like your company, perhaps now is the time to consider outsourcing payroll. Both payroll and reporting get more complex with every tax year. Why not let professionals manage it so that you and your staff can concentrate on what your company does best?
Please bear in mind that the penalties for failing to adhere to the new e-filing rules can be severe. The penalty for filing a single W-2 incorrectly can be as high as $290. Companies with total revenues of less than $5 million can be penalized up to $1.1 million in total. That amounts to a 20% penalty.
A Free Portal for Filing
If your company still handles payroll and HR in-house, you should at least know that the IRS has set up a free online portal through which your HR or accounting team can file tax records. You can find that portal here.
With up to forty million documents to deal with every year, the IRS really had little choice but to mandate electronic filing. Their mandate applies to your company if you file ten or more forms of the same type in any calendar year.
If you need a trusted and reputable company to outsource your tax compliance and filing to, know that Vertisource HR is your expert HR and accounting outsourcing resource. We offer both ASO and PEO services.