The IRS proposed new regulations to expand the Taxpayer First Act (TFA), which allowed the IRS to require mandatory electronic filing for a lower the threshold of information returns. These new regulations affect businesses, partnerships, and exempt organizations who file information returns, such as W-2 and 1099 forms. As a result, more employers will need to e-file these forms rather than paper filing them.

Previously, taxpayers filing 250 information returns or more during the calendar year were required to e-file. The proposed regulation reduces that threshold from 250 to 100 returns filed during 2022, then down from 100 to 10 returns filed per year during 2023 and beyond. Taxpayers must be vigilant about these lowered threshold requirements for mandatory e-filing in order to avoid penalties.

The proposed regulation does not contain special thresholds for partnerships, as the TFA previously did. This is because these regulations would be in effect after the special rule for partnerships is already phased out.

So, beginning in 2023, all taxpayers who meet with threshold of 10 information returns filed in a calendar year will be required to e-file the forms.  The IRS will determine if a business meets this threshold by taking the aggregate number of returns filed rather than counting each form type separately. Form 8300, used to report cash payments over $10,000, is excluded from this new aggregation rule.

In addition to these changes, the proposed regulations allow the IRS to create new rules regarding e-filing requirement of excise tax.

These new proposed regulations will help unburden the IRS from the overwhelming number of paper-filed returns filed each year, a struggle that the pandemic greatly exacerbated. They have requested submission of comments on the new proposed regulations by September 21, 2021.