Generally, an organization filing 10or more returns or statements (previously more than 250) in a calendar year will be required to file electronically in 2024.The regulations also require e-filing of certain returns and other documents not previously required to be e-filed (Reg Sec 301.6011-2).

However, the ten-return threshold does not make electronic filing mandatory for employment tax returns, such as Forms 940 and 941.

Filers must aggregate almost all return types covered by the regulation to determine whether a filer meets the 10-return threshold (Reg Sec 301.6011-2(c)(4)).

Previously mandatory e-file regulations were based upon a separate 250-return threshold for each type of information return. Beginning with returns filed in 2024 (generally 2023 returns) and for future years that is no longer the case. The final regulations require filers to aggregateacross return typesto determine whether a filer meets the 10-return threshold and is thus required to file electronically.

Example #1: Under the prior rule, an organization filing 200 Forms W-2 and 200 Forms 1099 were previously not required to electronically file these forms, since each return type did not separately exceed the 250-return threshold. Under the new aggregation rule, the number of Forms W-2 and 1099 would be combined to determine whether the threshold is met. And the organization in the example would be required to e-file the returns in 2024.

The following forms are those that are counted to determine if the 10-return threshold is met. (Reg Sec 301.6011-2(b)(1) and (b)(2)).

However, once the 10-return threshold is met from the returns listed above then all returns that are capable of being e-filed must be e-filed.

Example 2: Company A is required to file five Forms 1099-INT (Interest Income) and five Forms 1099-DIV (Dividends and Distributions), for a total of 10 information returns. Because Company A is required to file a total of 10 information returns, Company A must file all its 2023 Forms 1099-INT and 1099-DIV electronically, as well as any other return(s) that are subject to an electronic filing requirement. The reason being that Forms 1099 and W-2 are included in the list above and must be aggregated when counting to determine whether the new 10-or-more threshold for electronic filing is met.

Example #3: Company B is required to file nine Forms W-2 and one Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits. Company B is not required to file the Forms W-2 electronically because the aggregation rules only count the returns in the list, which does not include Form 8955-SSA nor the Company B’s income tax return. But Company B must file the Form 8955-SSA electronically because the aggregation rules for Form 8955-SSA take all returns into account.

Example #4: Corporation X, a C corporation with a fiscal year end of September 30, was required to file one Form 1120 (U.S. Corporation Income Tax Return) during the calendar year ending December 31, 2023, six Forms W-2 (for employees), three Forms 1099-DIV (for dividend distributions), one Form 940 (Employer’s Annual FUTA Tax Return) and four Forms 941 (Employer’s Quarterly Federal Tax Return). Because the Form 1120 aggregation rules include returns of any type during the calendar year that ends with or in the taxable year, and Corporation X is required to file more than 10 returns of any type during calendar year 2023, Corporation X is required to file its Form 1120 electronically for its taxable year ending September 30, 2024.

The new regulations also include new rues related to e-filing by S corporations (Reg Sec 301.6037-2). An S corporation income tax return required to be filed in a calendar year beginning after 2023 must be filed electronically if the corporation is required to file at least 10 returns during the calendar year ending with or within the corporation’s tax year. Previously a corporate income tax return must have been filed electronically if the corporation has assets of at least $10 million, and the corporation is required to file at least 250 returns during the calendar year ending with or within the corporation’s tax year.

The determination of whether a corporation is required to file at least the applicable number of returns is made by aggregating all returns, regardless of type, that the corporation is required to file over the calendar year, including income tax returns, information returns (for example, Forms W-2 and Forms 1099), excise tax returns, and employment tax returns. All members of a controlled group of corporations must file electronically if the aggregate number of returns to be filed by the members is at least 10 during the calendar year ending with or within the tax year of the controlled group.

Example #5: In 2023, an S-corporation was required to file one 2022 Form 1120-S, two Forms W–2, two Forms 1099–DIV, one Form 940, and four Forms 941. Because the company was required to file 10 returns during the calendar year 2023, it is required to file its 2023 Form 1120-S electronically.

Penalties under IRC Section 6721 may apply for non-electronic filing of information returns (e.g., Forms W-2, 1099-series, etc.) when electronic filing is required. Such penalties may also apply for non-filing, late filing, or incorrect information. The potential penalty in 2023 is up to $310 per information return ($60 if filed no more than 30 days late), up to an annual maximum of $3,783,000 (Rev Proc 2022-38). For businesses with annual gross receipts of less than $5 million, the maximum is $1,261,000. Penalty amounts are indexed and change annually.

If a person is required to file original information returns electronically, any corresponding corrected information returns must also be filed electronically. If a person is permitted to file information returns on paper and files such returns on paper, any corresponding corrected information returns must be filed in paper form.

Generally if the IRS does not support electronic filing of a particular return, electronic filing would not be required. For example, if an employer is filing a final Form 941 return in mid-year, expedited filing of Forms W-2 is generally required. However, because the Social Security Administration's systems may not support electronic filing of the current-year Form W-2 until late in the year, such returns will not be required to be filed electronically.

A business may file a request for a waiver from electronically filing information returns due to undue hardship. For more information businesses can refer to Form 8508, Application for a Waiver from Electronic Filing of Information Returns. If the IRS grants a waiver from e-filing any information return, that waiver automatically applies to e-fileable returns for the duration of the calendar year.

The regulations also require e-filing of certain returns and other documents that previously did not have to be filed electronically.

A material advisor is any person who provides any material aid or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction who directly or indirectly derives gross income more than $50,000 in the case of a reportable transaction substantially all the tax benefits from which are provided to natural persons, and $250,000 in any other case.