February 23, 2023
New IRS regulations on electronic filing requirements apply for 2024 returns
In final regulations (TD 9972), the IRS amended the rules for electronically filing certain returns to reflect changes made by the Taxpayer First Act of 2019 (TFA), which reduced the threshold for requiring taxpayers to file electronically in most cases from 250 annual returns to 10.
The 10-return threshold applies to returns required to be filed in calendar years 2024 and later. The 250-return threshold applies to returns filed in calendar years 2022 and 2023.
The regulations affect partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, and registration statements, disclosure statements, notifications, actuarial reports and certain information and excise tax returns.
New applicability date
The TFA amended IRC Section 6011(e), which had prohibited the IRS from requiring taxpayers that filed less than 250 returns per year to file electronically, to reduce the threshold to 100 per year for returns filed during calendar year 2022, and from 100 to 10, for returns filed during calendar years after 2022. The proposed regulations, issued in July 2021, would have adopted these timelines.
In response to comments on the proposed regulations, the IRS pushed back the effective date of the changes to returns filed in 2024, instead of the proposed 2023. Thus, according to the Preamble, the electronic-filing threshold for returns required to be filed in calendar years 2022 and 2023 remain unchanged at 250. The electronic-filing threshold of 10 will apply to returns required to be filed for tax years ending on or after December 31, 2023.
Meeting the threshold for information returns
The final regulations require taxpayers to aggregate almost all information return types in determining whether they meet the 10-return threshold. Earlier regulations permitted taxpayers to apply the 250-return threshold separately to each type of information return.
The final regulations also require partnerships with more than 100 partners to electronically file information returns. In addition, partnerships must electronically file their partnership return if they are required to file at least 10 returns of any type during the calendar year.
The IRS and Treasury pushed back the deadline for complying with the new requirements to give filers ample time to prepare. Filers should be aware of the new timeline and the requirements for various returns and other documents contained in the new regulations.
The lower electronic filing threshold will challenge some employers, particularly as it applies to corrected Forms W-2 where the number of forms submitted is often fewer than 10.
Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor