Understanding Form 1099, W-2, & 1095 Electronic Filing Requirements for 2023 Tax Year

Updated on January 24, 2024 - 10:30 AM by Admin, TaxBandits

Beginning with 2024 (i.e. 2023 Tax year), the IRS reduces the electronic filing threshold significantly for faster processing & improving accuracy.

Businesses who file aggregate of 10 information returns (1099, W-2, & 1095) in a calendar year, the IRS mandates filing of their returns electronically. Previously, the threshold was 250 or more returns.

In this article, we will be discussing the new threshold changes, their significance, and how they may impact Business owners & CPAs in the coming years.

1. Revised E-file Regulations for Businesses – T.D. 9972

T.D. 9972 is very important for businesses to be aware of. This is the IRS’ final declaration regarding e-filing thresholds. This document lays out the IRS e-filing requirements that took effect in 2024.

One of the primary aspects that businesses should understand from this regulation is that this revised e-filing requirement applies to the calendar year 2024 and not the 2024 tax year. This means that year-end forms for tax year 2023 that are due in January 2024 will be affected by this rule.

2. Summary of E-file Regulations for 2024

Outlined below are the significant changes pertaining to e-filing as per the new regulation:

  • Substantial Reduction in Threshold: As mentioned earlier, the new IRS regulations slash the e-filing threshold from 250 returns to 10. Therefore, any entity filing 10 or more returns within a calendar year is obliged to e-file.
  • Inclusive Aggregation of Return Types: Unlike the previous rule, where the 250-return threshold was applied individually to specific information return types (such as 1099-NEC and Form W-2), the revised IRS mandate necessitates the aggregation of nearly all information return types. Consequently, e-filing becomes mandatory when the cumulative count of various return types, such as Forms W-2, 1099-MISC, and 1099-NEC, reaches 10 or more.
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For instance, if a business owner files 6 W-2s, 5 1099-NEC, and 2 1099-MISC (13 total) should file electronically, as the total exceeds the threshold.

  • Elimination of E-filing Exception for Corporations: Additionally, the new rule abolishes the e-filing exception for corporation income tax returns reporting total assets under $10 million at the end of the taxable year.
  • Mandatory E-filing for Certain Partnerships: The amended rule also stipulates that partnerships with over 100 partners or those that are required to file at least 10 returns during the taxable year must opt for e-filing.

3. Reasons Behind This Change

In recent years, there has been tremendous growth in the usage of electronic filing services across the tax filing spectrum. Approximately 82% of all corporate income tax filings and over 90% of partnership tax returns were electronically submitted in 2021.

Furthermore, lowering the amount of submitted paper returns frees human resources and resources to improve taxpayer services. Additionally, it decreases postage, printing, shipping, storage, and other related expenses and hassles while increasing overall efficiency.

The IRS anticipates receiving around 5 billion information returns by 2028, up from the current yearly total of about 4 billion. Thus, the 2024 IRS electronic filing requirements of Forms 1099/W2/ACA 1095 aim to limit the number of paper returns by increasing the number of people who must e-file.

4. What Happens If the E-filing Requirements are Not Met?

Failure to adhere to the new e-filing requirements can result in substantial penalties ranging from $60 to $310 per form, underlying the importance of timely adherence to the updated regulations.

5. E-file 1099, W2, & 1095 for 2023 Tax Year With TaxBandits!

If you are a business owner, switching from the traditional way of filing on paper to electronic filing can be challenging. But, with TaxBandits, you can make your e-filing process as seamless as possible.

The IRS-authorized e-file provider offers exclusive features and various data import options and integrations that can streamline your preparation and e-filing of 1099, W-2, and ACA 1095 Forms.

Here are some of the benefits you can have by e-filing your returns with TaxBandits:

  • Take care of both Federal and State filing in one place.
  • Let TaxBandits take care of printing and mailing of recipient copies
  • Go paperless with our Online Access to Distribute form copies digitally
  • Import using Excel/CSV Templates if you are filing in Bulk
  • Ensure accurate filing with Internal Audit Check and TIN Matching
  • Get instant help from our dedicated support via Phone, E-mail or Live Chat
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