Renner Business News; December 12, 2023

Important changes will take effect for Form 1099 filers for the upcoming tax season. Specifically, the final regulations will require certain filers to e-file.

Changes made as part of the Taxpayer First Act (TFA) were intended to increase e-filing without undue hardship on taxpayers. The changes in T.D. 9972 affect filers of partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports and certain excise tax returns.

Specifically, the final regulations do the following:

  • reduce the 250-return threshold enacted in prior regulations to generally require electronic filing by filers of 10 or more returns in a calendar year. The final regulations also create several new regulations to require e-filing of certain returns and other documents not previously required to be e-filed;
  • require filers to aggregate almost all information return types covered by the regulation to determine whether a filer meets the 10-return threshold and is required to e-file their information returns. Earlier regulations applied the 250-return threshold separately to each type of information return covered by the regulations;
  • eliminate the e-filing exception for income tax returns of corporations that report total assets under $10 million at the end of their taxable year, and
  • require partnerships with more than 100 partners to e-file information returns, and they require partnerships required to file at least 10 returns of any type during the calendar year to e-file their partnership return.

“The new thread of 10 forms includes forms of W-2s and 1099s,” said Huishan Huang, tax manager at Renner and Company. “If you have five employees and six independent contractors, you will need to e-file both the W-2s and 1099s. Business owners, who have a total of less than 10 employees and independent contractor(s), can still do paper file.”

The IRS created a new, free online platform to help businesses file Form 1099 series information returns electronically. Known as the Information Returns Intake System (IRIS), this free electronic filing service is secure, accurate and requires no special software.

Though available to any business of any size, IRIS may be especially helpful to any small business that currently sends its 1099 forms on paper to the IRS.

There has been tremendous growth in recent years of the availability of e-file services and the use of e-file across the tax filing spectrum. In 2021, about 82% of all corporate income tax returns were e-filed, and almost 90% of partnership tax returns were e-filed. The benefits of e-filing, instead of paper filing, include freeing up staff and resources to further enhance services for taxpayers and improving overall efficiencies while reducing postage, printing, shipping and storage and their associated costs and burdens.

The IRS receives nearly 4 billion information returns per year and expects to receive nearly 5 billion by 2028. In 2019, the IRS still received nearly 40 million paper information returns, even though approximately 99% of all information returns for that year were e-filed.

The final regulations generally provide hardship waivers for filers that would experience hardship in complying with the e-filing requirements and administrative exemptions from the e-filing requirements to promote effective and efficient tax administration.

There’s more to know about this. Contact Renner and Company here to help with filing your 1099s or questions about the new regulations.

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