Final IRS Regulations Dramatically Expand Information Return Electronic Filing Requirement

Author: Rena Pirsos, XpertHR Legal Editor

February 27, 2023

The IRS issued final regulations on February 21 that dramatically lower the mandatory threshold for electronic filing of all information returns (e.g., Forms W-2, 1099-NEC, 1094s, 1095s). Effective with information returns filed in 2024, an employer that files 10 or more of such returns in a calendar year must file them electronically. Previously, electronic filing was required if an employer filed 250 or more information returns in a calendar year.

The final regulations do not adopt provisions of the earlier proposed regulations that would have lowered the electronic filing threshold in two steps: First to 100 or more returns required to be filed in 2022, and then to 10 or more returns required to be filed in 2023. According to the IRS, the first step down is not necessary because the regulations do not become effective until 2024.

The electronic filing threshold for information returns required to be filed in 2023 remains at 250 or more returns. Electronically filed Forms 1099, except Form 1099-NEC, are due March 31, 2023.

Aggregation Is Required

To determine whether an employer meets the 10-return electronic filing threshold, instead of counting each type of return separately, the regulations require an employer to aggregate almost all information returns (and certain other statements and documents) they are required to file regardless of tax type (e.g., partnership, excise, corporate income tax returns, and various registration and disclosure statements covered by the regulations).

The following payroll-related information returns are covered by the regulations (not an exhaustive list):

  • Form W-2;
  • Form 1099-NEC;
  • Form 1099-MISC;
  • Form 1099-R;
  • Form 1095-C;
  • Form 1095-B;
  • Form 1094-C;
  • Form 1094-B;
  • Form 3921;
  • Form 3922; and
  • Form 8027.

In addition, an employer that must file its information returns electronically must also file any corrected information returns electronically, regardless of the number of corrected forms it must file.

Limited Exemptions

The final regulations provide that the IRS may permit exemptions from the electronic filing requirements to promote effective and efficient tax administration, including under the following circumstances:

  • If an employer's use of the technology required to file electronically conflicts with its religious beliefs. In general, this exemption will be available on a form-by-form basis, rather than on a per-filer basis;
  • If the IRS's systems do not support electronic filing for a specific return; and
  • If an employer is required to file a final return on Form 941 and expedited filing of Forms W-2 is required, but the IRS's systems do not support electronic filing.

Employers seeking hardship waivers from the electronic filing requirements must file Form 8508.

Information Returns Intake System (IRIS)

Small employers are reminded that they may find it easier to comply with the expanded electronic filing mandate if they use the IRS's free Information Returns Intake System (IRIS), which was launched earlier this year. IRIS is limited to employers that file no more than 100 Forms 1099 per submission. Employers must apply for authorization before being able to use IRIS.