Proposed IRS Changes to E-filing Requirements could Impact your Business

Businesses will soon be required to e-file the majority of their information returns!

Stephanie Glanville | November 12, 2021 | Read time: 4 minute(s) | Current Events, IRS Updates | No Comments

The IRS has long preferred that businesses e-file their forms rather than mailing in paper forms. They have made this abundantly clear in a new proposal for e-filing requirements.

It is likely the IRS will finalize the guidelines proposed in the near future, however, businesses should keep this in mind as it pertains to their year-end filing deadlines on January 31, 2022.

These are the highlights of the IRS proposal, and what businesses and tax professionals need to know going forward.

The IRS Proposal for the E-filing Threshold

The current e-file threshold for businesses is 250 forms. This number currently applies to individual tax forms, for example, you can e-file 249 1099 Forms and 249 W-2s with the IRS. However, this could potentially be changing.

According to this IRS Proposal, that will be changing. Going forward, the IRS would limit businesses to paper-filing a total of 250 forms during a tax year.

This means that a business filing 249 1099 Forms and 249 W-2s, would file a total of 498 forms. Because this crosses the 250 thresholds, e-filing would be required for at least half of them.

How soon could this happen?

You may be wondering how soon these changes will take effect. When finalized by the IRS, this rule would go into effect soon enough to affect your year-end filing for the tax year 2021.

This will potentially affect how you file your Forms W-2, 1099, and 1095 in January.

For the tax year 2022, the IRS would limit businesses to paper filing a combination of no more than 100 information returns. Beyond 2022, the IRS would then slash this number from 100 to 10. This would essentially force all businesses to switch from paper filing to solely e-filing.

Once in effect, this will impact even the smallest employers.

How Can Businesses Prepare for the Coming Changes?

Businesses of all sizes can be proactive when it comes to IRS e-filing requirements. Going into the year-end deadlines, e-filing is the way to go. Regardless of the IRS requirements, e-filing is a simpler and more efficient way to file your Forms W-2, 1099, 940, 1095s, 941, and more.

TaxBandits takes the hassle out of your year-end filing by providing a smooth e-filing process with built-in error checks and time-saving features. By stocking up on prepaid credits, tax professionals and business owners can lock in their best pricing.

The holidays are right around the corner and the January 31st deadlines will be here before you know it! Now is the time to get ahead on your year-end filing!