Odds are, the answer is “yes.”
In 1986, the Internal Revenue Service (IRS) began accepting simple tax returns electronically. Since then, the IRS has significantly improved its electronic filing capabilities, and businesses are now often required to e-File certain forms.
On average, the IRS receives almost 200 million tax returns each year, including approximately 150 million individual income tax returns, 15 million business income tax returns, 30 million employment tax returns, and various other return types. For the fiscal year 2023, nearly 213.3 million returns and other forms were filed electronically. This amounted to over 78% of all filings.
Why e-File Anyway?
At the end of the calendar year, businesses must submit all necessary year-end forms to the appropriate regulatory agency. Electronic filing has become a popular, and sometimes required, way to complete this process for a variety of reasons.
- Documents are processed faster and with more accuracy.
- Forms can be submitted from anywhere.
- e-Filing software is convenient, safe, and secure.
- Receipt of confirmation is delivered almost instantly to provide peace of mind.
However, in some cases, completing year-end forms by hand may be a suitable option.
- For small businesses that don’t have many forms to file, it may be just as easy to file by hand.
- The cost of paying for software to prepare year-end forms may outweigh the benefits for some organizations.
Regardless, handwritten forms take much longer to be processed than electronically submitted documents. As a result, many regulatory agencies are pushing for more businesses to e-File.
Who is Currently Required to e-File?
Generally speaking, the e-Filing requirements are determined based on the number of records a business is filing to a reporting agency, such as a federal agency (the IRS, for example), a state agency, or a local agency. Some states are willing to be flexible if a business can make a substantial claim as to why they should be excluded from e-Filing requirements. However, the federal government is generally not flexible.
To further encourage the use of electronic filing, on July 22, 1998, the federal government passed the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98). IRS RRA 98 contained a provision setting a goal of an 80 percent e-File rate by 2007 for “all federal tax and information returns.” This applies to many business taxes, such as corporate income and payroll taxes.
What Agencies Accept e-Files?
At the federal level, almost all forms can be submitted electronically through multiple different sites and systems that have been created. Additionally, there are government-supported e-Filing providers to assist in the process. Greenshades is one of those providers as an approved Electronic Return Originator, Software Developer, and Transmitter.
The options vary by location at the state and local levels, so check your local and state government websites to find out what is available.
e-Filing to the SSA
Forms W-2 and W-3
Companies must distribute a copy of every employee’s W-2 and a corresponding W-3 to the Social Security Administration (SSA) by January 31st each year.
Employers must distribute a W-2 to all employees and former employees who received payments for their services during the tax year. Form W-3 (Transmittal of Wage and Tax Statements) accompanies Copy A of Form W-2 to the Social Security Administration (SSA).
In recent years, the SSA has taken steps to reduce the number of forms filed on paper. The Taxpayer First Act, ratified in 2019, requires more employers to file W-2s or W-2Cs electronically. Beginning January 2024, employers who file 10 or more W-2s will have to send them to SSA electronically.
SSA e-File Info:
- Who is required to e-File: Businesses that file 10 or more W-2s.
- What can be e-Filed: Forms W-2 and W-3
- How it can be e-Filed: Through Business Services Online
e-Filing to the IRS
Information Return Forms
The IRS encourages businesses to e-File many of the required year-end forms. By doing so, documents can be processed faster and with fewer errors. In addition, many companies can benefit from participating in the Combined Federal/State Filing Program (CF/SF), which eliminates duplicate work.
The IRS accepts almost all information returns (records other than tax returns that the IRS requires to document certain financial transactions) through e-Filing.
IRS Information Return e-File Info:
- Who is required to e-File: Any business reporting 10 records or more, per entity
- What can be e-Filed: Forms 1042-S, 1097, 1098, 1099, 3921, 3922, 5498, 8027, 8955-SSA, 8596, and W-2G
- How it can be e-Filed: Through the Filing Information Returns Electronically (FIRE) system
TIP: Unless e-Filing through a 3rd party application, Transmitter Control Code (TCC) registration will need to be completed with the IRS.
Affordable Care Act Filings
The Affordable Care Act (ACA) reformed health insurance and included specific tax provisions that impacted businesses. It requires that insurance companies, self-insured companies, and large businesses that provide health insurance to their employees submit information returns to the IRS reporting on an individual’s health insurance coverage.
IRS ACA Forms e-File Info:
- Who is required to e-File: Any business reporting 10 records or more, per entity
- What can be e-Filed: Forms 1094-B, 1095-B, 1094-C, and 1095-C
- How it can be e-Filed: Through the Affordable Care Act Information Return (AIR) system
Employment Tax Forms
While not required to be filed electronically, the IRS encourages employers to file employment tax forms via their e-File system. This includes employment tax Forms 940, 941, 943, 944, and 945.
Form 940 is used to report annual Federal Unemployment Tax, or FUTA, and Form 941 is a quarterly tax return used to report income taxes, social security tax, or Medicare tax withheld from employees’ paychecks. These are the most common forms businesses need to submit at year-end.
IRS Employment Tax Forms e-File Info:
- Who is required to e-File: No business is required to e-File, but it is encouraged
- What can be e-Filed: Forms 940, 941, 943, 944, and 945
- How it can be e-Filed: Through the options listed here
State E-Filing Requirements
All 50 states support electronic reporting formats for State Unemployment (SUTA/SUI), SDI (State Disability), and State W-2s. Most states require e-Filing for businesses with more than 250 records. However, many states have far lower thresholds. Specific reporting methods vary by state.
TIP: Eleven (11) states do not require Forms W-2 to be sent to them (California and New York) or do not have a state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming).
In addition, there is an information-sharing agreement between the IRS and certain states called the Combined Federal/State Filing Program (CF/SF). The agreement allows the IRS to send various 1099 forms directly to certain states. This saves businesses from duplicating work, as organizations only need to submit those forms once to the IRS.
Local Requirements
Most local jurisdictions do not require e-Filing; however, many localities accept electronic filings instead of paper returns if a business prefers.
What about electronic payment requirements?
As of January 1, 2011, the IRS eliminated Form 8109 — the last link with paper tax deposit coupons — forcing employers to use the Electronic Federal Tax Payment System (EFTPS) for all deposits, including payroll taxes.
The EFPTS tax payment service is provided free by the US Department of the Treasury. After you’ve enrolled and received your credentials, you can pay any tax due to the Internal Revenue Service (IRS) using this system.
Preparing Your Business
Organizations will need to prepare for additional e-Filing requirements to be passed down from various regulatory bodies as the IRS pushes to meet its 80 percent e-Filing goal. Now is the time to invest in a system that can support the electronic distribution and filing of forms, so your organization doesn’t fall behind.
Prepare for Year-End Success! Access our essential resources to stay compliant and simplify your Year-End Forms process for 2024. Explore Now
Year-end forms can be complex and overwhelming but using the right technology partner can make all the difference. Greenshades has been helping businesses streamline and simplify the process through accurate and user-friendly solutions. If you would like to book a discussion with one of our year-end forms processing experts, contact sales, sales@greenshades.com or call us at 888-255-3815, and we'll set up a time to discuss your specific needs.
Before your business is ready to e-File, make sure your year-end forms checklist is complete! Download our Beginner's Guide to Year-End Forms to make sure you have every form and hit every deadline!