It's no surprise that, after facing a ginormous backlog of paper tax forms that piled up when the Internal Revenue Service closed most of its campuses during the height of the COVID-19 pandemic last year, the agency is looking to force more electronic filings.
Proposed regulations published in today's Federal Register add seven forms to the IRS list of returns that businesses must, once a certain filing threshold is reached, submit electronically.
The move is made possible by a provision of the Taxpayer First Act (TFA), which became law in July 2019 and included a variety of changes designed to make IRS operations more taxpayer friendly.
Speeding up electronic filings: Part of the TFA lowers the number of information returns — earnings documents such as Form W-2, Wage and Tax Statement, for salaried workers and the various 1099 series for other earnings — that employers are allowed to file by paper. The goal is to speed up e-filing so that information gets into IRS system sooner, shortening the agency's processing and response times.
Forms that will be added to the e-filing list per these latest IRS' proposed regulations are:
- Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons;
- Form 1097-BTC, Bond Tax Credit;
- Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes;
- Form 1098-Q, Qualifying Longevity Annuity Contract Information;
- Form 3921, Exercise of an Incentive Stock Option Under Section 422(b);
- Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c); and
- Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
All these forms, although not among the most common, also are the latest to join the Tax Form Fiesta! page here on the ol' blog.
Separate counts for each form: In determining whether sufficient returns are issued to require e-filings, the proposed regs say that each type of information return covered can be counted separately when it comes to reaching the 250 electronic trigger.
"Therefore, different types of information returns are not counted in the aggregate for purposes of determining whether a person is required to file a number of returns that equals or exceeds the 250-return electronic-filing threshold during the calendar year (non-aggregation rule)," according to the regs.
In addition, the IRS specifically notes that its proposed regulations do not include Forms 8300 in the aggregation rule, and no Form 8300 would be included in determining whether a person is required to file the applicable number of information returns.
This exclusion is because issuers of Form 8300 generally must file the form within 15 days after a reportable payment of more than $10,000 is received. A filer may not know the number of Forms 8300 it will file in a calendar year until after the year is over, because the filer will not know how many cash transactions over $10,000 will occur during the year.
The proposed rules also say that any corrected information returns must be filed electronically if the original returns were e-filed.
Partnership filing changes: The proposed regs also alter e-filing requirements for large partnerships. Large partnerships would be required to electronically submit applicable information returns regardless of the number they file.
The TFA originally set an e-filing threshold of 200 returns for partnerships, with that amount gradually reduced to 50 for calendar year 2021. However, a subsequent amended special rule for partnerships authorized the Treasury Secretary to reduce the electronic-filing threshold at an accelerated rate.
Per this option and in light of "the TFA's emphasis on development, improvement, and expansion of modern technology," and "emphasis on electronic filing," the regs propose requiring partnerships with more than 100 partners to electronically file their covered information returns, regardless of the number of information returns being filed.
Comments requested: If you'd like to comment on these proposed e-filing regs, do so by Sept. 21.
Not surprisingly, the IRS is asking that comments be submitted, you got it, electronically via the Federal eRulemaking Portal. When commenting online, indicate IRS and REG–102951–16.
If you want to comment in writing (presumably to oppose the regs), you can do so by sending your paper submission to:
CC:PA:LPD:PR (REG–102951–16) Room 5203
Internal Revenue Service
P.O. Box 7604 Ben Franklin Station
Washington, D.C. 20044
The IRS will hold a public hearing via teleconference on the e-filing regs at 10 a.m. Eastern Standard Time on Sept. 22. Requests to attend the hearing must be received by 5 p.m. EST on Sept. 20.
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