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Proposed IRS Rule Would Impact Tax Filings for Small Employers

A new IRS proposed rule would significantly impact the way small employers submit their tax filings. If finalized, nearly all employers would be required to electronically file various tax forms, including corporate tax returns, Forms 1094-C and 1095-C and Forms W-2 and 1099.

How Would the Proposed Rule Change Employer Filings?

Under current rules, an employer is not required to electronically file unless filing at least 250 of the same form. Aggregating the forms is not currently required. So long as you were not filing more than 250 W-2s, for example, you could still submit paper filings even if the total of all forms submitted exceeds 250.
The proposed rule would lower that threshold to 100 forms for 2022 and only ten forms for 2023 and beyond. The rule would also require employers to aggregate all the forms they are submitting. Electronic filing will be required if the aggregated forms exceed 100 in 2022 or 10 in any year after. If you are required to file electronically, corrections to any filing would also be done electronically.

Prepare Now

Public comments on the proposed rule will be accepted until September 21, 2021. It is anticipated that the rule will go final soon after. Employers will want to start preparing now. If you have been filing on paper and want to continue to do so, it will be possible to obtain a waiver if you can establish undue hardship. The principal factor when determining undue hardship will be the difference in cost between filing on paper and filing electronically. Employers will want to watch for future regulations that will detail how to request a waiver.

The IRS website has information on how to file electronic tax information safely. The deadlines for paper versus electronic filing are often different, so employers should start planning any process changes now to ensure a new deadline is met. Contact your vendor directly to make sure they know the proposed rule and make any necessary changes to help you comply. If you do not have a vendor and think you’ll need one, start searching now so you’ll be ready to comply when the changes take effect next year.

For more information on how to ensure your organization remains compliant with new national and local regulations, visit OneDigital's Compliance Confidence page.