There are new updates in regards to e-file taxes from the IRS for 2024. Starting February 2024 most businesses will be required to do electronic filing since the IRS agency received over four billion information-based returns this year. Utilizing e-filing taxes enhances efficiency, enabling the IRS to expedite return processing and maintain more accurate documentation records.
The final rules also require filers to aggregate across nearly all information return types covered by the regulation to determine whether a filer meets the 10-return threshold. If business owners meet the 10-return threshold, they will be 100% required to file electronically.
Under this new rule, the number of Forms W-2 and 1099 a company has would be combined to determine whether the 10-return threshold is met.
What Type of Forms are Included in the New Mandate E-File Taxes in 2024
The following forms are required to be processed in this mandate:
- Form 1042-S
- Form 1094 series
- Form 1095-B
- Form 1095-C
- Form 1097-BTC
- Form 1098
- Form 1098-C
- Form 1098-E
- Form 1098-Q
- Form 1098-T
- Form 1099 series
- Form 3921
- Form 3922
- Form 5498 series
- Form 8027
- Form W-2G
In 2019, the IRS still received nearly 40 million paper information returns, even though approximately 99% of all information returns for that year were e-filed.
The IRS also noted that electronic filing has become more common, accessible, and economical, as evidenced by the prevalence of return preparers and service providers offering electronic filing services; the availability of relevant software, and the number of returns already being filed electronically voluntarily..
What Types of Businesses are Required to E-File
Whether business owners operating as a corporation, partnership, or sole proprietorship, have been required to electronically file information returns when the aggregate number of these returns, regardless of the type of return, for a tax year was more than 250.
The IRS issued regulations in February 2023 lowering the threshold to 10 or more returns, effective with the returns filed on or after January 1, 2024. For the most part, this means the electronic filing mandate will apply to 2023 information returns.
Small business owners who previously submitted paper information returns will now find that they will need to file the forms electronically. This is because the number of information returns they had to issue was below the 250 threshold.
Under the prior rules, the threshold number of returns for required e-filing applied separately to each type of return, while under the new regulations, all types of information returns are combined when totaling up the number of returns required to be filed.
Affected employers may need significant lead time to implement new software, policies, and procedures to comply with the new rules.
Why the E-Filing IRS Mandate?
The IRS believes that the electronic filing mandate is necessary due to the sheer volume – some four billion information returns – they receive each year. Although about 99% of all information returns in 2019 were e-filed, that still left nearly 40 million paper information returns for the IRS to handle.
During the pandemic, paper filings extremely slowed down the IRS’s ability to efficiently process returns. Instilling the lower threshold, the IRS also noted that electronic filing has become more common, accessible, and economical.
There are other filings affected by the new mandate. The regulations also require the e-filing of certain returns and other documents such as:
- Partnership Returns
- Corporate Income Tax Returns
- Unrelated Business Income Tax Returns
- Registration Statements
- Disclosure Statements Notifications
- Actuarial Reports
A partnership business with more than 100 partners must file its information returns electronically regardless of the number of information returns the partnership must file during the calendar year.
Consequences for Not Filing Electronically with the IRS
Penalties under IRC Section 6721 may apply for non-electronic filing of information returns (Forms W-2, 1099-series, and more) when electronic filing is required. Such penalties may also apply for non-filing, late filing, or incorrect information. The potential penalty in 2024 is up to $310 per information return, up to an annual maximum of $3,783,000. For businesses with annual gross receipts of less than $5 million, the maximum is $1,261,000. Penalty amounts are indexed and change annually.
There is a waiver option for business owners. A business may request a waiver from having to electronically file information returns due to undue hardship.
How to E-File Taxes in 2024
You can use the IRS portal. The IRS has an online portal to help businesses file Form 1099 series information returns electronically. This free electronic filing service portal is secure, accurate, and requires no special software.
Even if filters are not required to file electronically under the new rules, they may want to consider doing so, to get familiar with the new process. Electronic filing may reduce administrative efforts compared to paper filing, can increase accuracy, and improve record retention.
Need Personalized Help
Leveraging the IRS online portal for electronic filing of Form 1099 series information returns proves to be a secure, accurate, and hassle-free solution for businesses. Beck + Ibarra is here to assist you with your financial advising needs including any questions on e-file taxes, and while the new rules may demand adjustments when it comes to filing, we can help you along the process. Contact us today for personalized tax help in Dallas Fort Worth.
