Is your business prepared for the recent changes to IRS regulations? The IRS issued final regulations that amend the filing rules for W-2, 1099, and other information returns, which will affect your year-end process in 2024.
The purpose of the e-file requirement thresholds is to enhance resources and services available to taxpayers, streamline tax time, and improve the overall efficiency of the operation, such as reducing postage, printing, and shipping.
It’s crucial to understand that these regulations may have significant implications for your business. Staying informed and compliant with IRS filing requirements is essential to avoid potential penalties.
One key change is the reduction of the e-file requirement threshold for information returns, effective January 1, 2024. According to T.D. 9972, e-filing is now mandatory for businesses that file 10 or more returns in a calendar year.
This applies to 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. Unlike previous rules, the new threshold is now an aggregate of all returns, regardless of the type of information return.
Notably, the regulation change eliminates the previous exception for corporations reporting total assets under $10 million. Any corporation that files 10 or more returns in a calendar year must comply with the e-file rules. Additionally, partnerships with more than 100 partners must e-file if they file 10 returns of any type.
To assist businesses in e-filing their information returns, the IRS launched a new portal that is free, secure, and easy to use. The portal is specifically designed to help businesses file their 1099 series returns electronically. This initiative aims to increase the number of e-filed returns significantly.
In addition to the changes in e-filing requirements, the IRS also streamlined the W-2 filing process for businesses. Businesses will be able to complete and print Copies 1, B, C, 2 (if applicable), and D (if applicable) of Forms W-2, W-2AS, W-2GU, and W-2VI on IRS.gov. The IRS has also removed Copy D and the Note for Employers (originally on the back of Copy D) from Forms W-2AS, W-2GU, and W-2VI to reduce the number of pages for printing purposes.
Finally, penalties for businesses that fail to meet proper reporting requirements have increased to adjust for inflation. The new amounts will apply to any return that is required to be filed after December 31, 2023. The amount of the penalty is based on when you file the correct Form W-2, ranging from $60 per form if you correctly file within 30 days of the due date, up to $310 per form if you file after August 1, do not file corrections, or do not file required W-2 forms. The maximum penalty is $3,783,000 per year for noncompliance ($1,261,000 for small businesses).
To ensure your business doesn't incur any penalties due to improper reporting, it's critical that you keep up with all IRS regulation changes. Before you begin your end of year process, consider evaluating the following:
Greenshades’ team of tax experts stay on top of tax rules and regulations and adjust our solution as needed to accommodate changes. In addition, we provide one solution for all your W-2s, 1099s, and other year-end forms. Our software collects and validates your data, creates forms, and allows for easy reviews, bulk updates, and SSN verification.
Once your forms are prepared, you can easily digitally file your returns, or Greenshades can submit returns and payments on your behalf. Schedule a demo today to learn more about our tax and compliance solutions and how we can make your year-end process smooth and efficient.
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