Insight Article

New IRS Regulations Increase Electronic Filing Requirements For Forms W-2 and 1099

January 22, 2024 | by Kushner LaGraize, LLC

In an effort to streamline processes and promote sustainability, the Internal Revenue Service (IRS) has recently released new regulations that significantly expand mandatory electronic filing requirements. These new regulations, which were published on February 23, 2023, mandate that almost all tax and information returns filed on or after January 1, 2024, be submitted electronically. 

The IRS's new regulations have reduced the threshold for mandatory electronic filing. Previously, only entities filing 250 or more returns were required to file electronically. However, under the new regulations, entities filing 10 or more returns of any type in a calendar year must submit these returns electronically. This new rule is set to impact a substantial number of businesses and individuals and will commence with tax year 2023. 

The shift expands the requirement to a more extensive range of returns than before. Some of the returns affected by the new mandate include information returns such as, 1099 forms and W-2 forms, among others. Thus, employers who need to file 3 Forms 1099 and 7 Forms W-2 for the year 2023 must electronically file both the 1099 and W-2 series of forms with the IRS since the total number of information returns required to be filed for the year is 10. However, it's worth noting that the 10-return threshold does not apply to certain employment tax returns, such as Forms 940 and 941.

To assist taxpayers with this transition, the IRS has developed a secure online portal known as IRIS (Information Returns Intake System). This system is available to filers of all sizes and does not necessitate any additional software. It's designed to streamline the filing process, detect errors, and provide a platform for filers to upload, edit, view, and download completed forms. 

The new electronic filing requirements may seem daunting, but they offer a more efficient, timely, and environmentally-friendly approach to tax filing. For businesses and individuals unsure about the new regulations or how they apply, we recommend that you get in touch with a tax professional or other trusted advisor to ensure compliance and smooth transition. We would be happy to assist. Please see our contact information below.

The IRS's latest regulations mark a significant step toward the digitization of the tax filing process, reflecting the broader trend toward digital operations in all sectors.

Please be advised that a failure to file in the required manner (for example, electronically or on machine-readable paper forms) is considered a failure to file. The penalties differ based on the type of return. For information returns, such as Forms W-2 and Form 1099 series, the penalty under Internal Revenue Code Section 6721 would apply, which is up to $310 per information return (for 2023 information returns required to be filed in 2024) with an annual maximum penalty of $3,783,000 ($1,891,500 for small businesses with annual gross receipts of no more than $5 million). Penalty amounts are indexed and change annually.

The Federal Register states that you must file corrected returns in the same format as the original. For example, you must e-file a corrected form if you were required to e-file the original return. In addition, if you paper filed the original forms 1099 or W-2 then you must paper file the corrected return.