E-Filing Now Required for 10 or More Information Returns
As of the 2023 tax year, the IRS has implemented new e-filing regulations requiring all businesses to file 10 or more information returns electronically. This update affects a range of forms, including Forms W-2 (which must be e-filed with the Social Security Administration), Forms 1099-MISC, and 1099-NEC. These changes are part of the IRS’s ongoing efforts to streamline reporting, improve accuracy, and minimize fraud risks.
If your business or self-employed status involves filing 10 or more information returns, it’s important to understand the new e-filing requirements, including the necessity to apply for a Transmitter Control Code (TCC) and other filing rules.
Understanding the E-Filing Requirements
The IRS mandates that if you are submitting 10 or more information returns, you must file them electronically starting in tax year 2023. This includes various forms such as:
- Form 1099-NEC: For reporting non-employee compensation (e.g., independent contractors).
- Form 1099-MISC: For reporting miscellaneous income, such as rents, royalties, and other payments like medical services.
- Form W-2: For wages and salaries paid to employees, to be e-filed with the Social Security Administration.
Why E-Filing?
E-filing is faster, more secure, and reduces the risk of errors associated with manual processing. The IRS encourages e-filing for all returns, even if you’re filing fewer than 10 forms. However, if you’re filing 10 or more returns, e-filing is now required.
Steps to E-File Information Returns
- Apply for a Transmitter Control Code (TCC): If you have not already done so, you need to apply for a TCC through the IRS e-file system. The TCC is necessary to submit your returns electronically. Processing this application can take up to 45 days, so it is crucial to apply well before the filing deadline.
- File via the IRS Information Return Intake System (IRIS): The IRS provides the Information Return Intake System (IRIS) for e-filing certain forms, including 1099 forms. You can use IRIS for tax years 2022 and beyond.
- Do Not Use Downloaded IRS Forms for Filing: If you plan to file paper forms, ensure you use the official IRS printed versions, as these are scannable. Downloaded versions from the IRS website are not scannable and may result in penalties.
- Use QuickBooks or Track1099.com if You Missed the TCC Deadline: If you did not apply for a TCC in time, you can still e-file your forms using QuickBooks’ 1099 reporting feature or track1099.com. These platforms allow you to electronically file the forms and also email them directly to recipients before the deadline.
Who Needs to File Information Returns?
If you made certain types of payments during the year, you may need to file information returns. This includes payments such as:
- Form 1099-NEC: If you paid at least $600 for services, including parts and materials, to non-employees, or paid attorneys for legal services.
- Form 1099-MISC: If you paid rents, royalties, or certain types of miscellaneous income.
- Form 1099-INT: For interest payments to individuals or entities.
- Form 1099-DIV: For dividends or distributions to company shareholders.
Exceptions: When Not to File Information Returns
You are not required to file information returns if:
- You are not engaged in a trade or business.
- Payments were made to incorporated businesses, unless for medical or legal services.
- The total amount paid to a person or unincorporated business is less than $600 for the year.
Penalties for Non-Compliance
Failure to comply with the e-filing requirement can result in penalties. The penalties depend on how late the forms are filed and can range from $50 to $280 per form. Additionally, errors that prevent the forms from being scanned properly may also lead to penalties.
Extensions
If you find that you need more time to file your information returns or if you don’t have all the necessary information by the deadline, you can request an extension from the IRS. To do so, submit Form 8809 to request an extension. This form can be filed online through the FIRE system and provides an automatic 30-day extension for submitting your returns.
Keep in mind that this extension is for filing the forms, not for paying any taxes due. You must ensure that any taxes owed are paid by the original deadline to avoid penalties and interest.
Conclusion
Starting in tax year 2023, businesses filing 10 or more information returns must do so electronically, including Forms W-2, 1099-NEC, and 1099-MISC. To ensure timely filing, apply for your Transmitter Control Code (TCC) early and make sure you’re familiar with the IRS’s filing system. E-filing offers numerous benefits, including efficiency, accuracy, and avoiding penalties. Stay ahead of these new requirements to remain compliant and avoid costly mistakes.
Resources
Related Posts
Was this helpful?
