IRS Lowers eFile Threshold to 10 Forms for Tax Year 2023

The Treasury Department and IRS announced changes this week to electronic filing requirements for a number of 1099 forms and Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons). This notice provides final confirmation on the timeline for implementation of many changes announced as part of the Taxpayer First Act in 2019 and will take effect for returns beginning in tax year 2023 (submitted to the IRS in early 2024). Here are the major changes and what they mean to you:

• The form volume threshold for electronic filing will be reduced from 250 forms or more to 10 forms or more. In addition, the method of determining how many forms will be aggregated across all return types you are required to file (rather than on a per-return type basis). This means if the aggregate total of your W-2’s, 1099’s, ACA forms and 1042-S forms is 10 forms or greater, you must electronically file.
• Corrections must be filed in the same manner as the corresponding originals were filed. Many small- to medium-sized businesses may use 1099 reporting capabilities built into their accounting software to file originals, but many of these systems may not support corrections for 1099 information that was previously filed. If you have previously filed corrections on paper to accommodate this, you will need to update your process to ensure the same method is used for originals and corrections to avoid penalties.
• Increased penalty enforcement! The applicable section 6721 penalties for information returns was also updated. With electronic filing, the information will be subject to electronic audit review, so filing correctly and on time will take on increased importance. It will be critical to proactively look across all your returns—W-2s, 1099s, ACA forms, 1042-S forms, etc.—to ensure you understand the new requirements and deadlines to avoid penalties for tax year 2023 and beyond.

Businesses should act now to ensure their systems and processes are updated to comply with these electronic filing changes. For more information on how eFileMyForms can help, visit our 1099 Services page.