The IRS released proposed regulations reducing the electronic-filing threshold for information returns such as Forms 1094-C and 1095-C, W-2s and 1099s. In addition to the lower threshold, the proposed regulations are now casting a wider net by requiring employers calculate the threshold using all the Forms aggregated together, not separately.
Reduction of the Electronic-Filing Threshold
Currently, employers that file 250 returns during the calendar year, are required to file electronically. For calendar year 2022, the proposed amendment maintains that the ceiling is reduced from 250 to 100 Forms, (and to 10 for returns due in 2023 and beyond). For example, if a taxpayer has 13 employees in calendar year 2022 and is required to file Forms W–2 for those employees during calendar year 2023, that taxpayer would be required to file those 13 Forms W–2 electronically.
Implementation of the Aggregation Rules
Presently, the 250-return threshold applies separately to each type of information return a taxpayer is required to file. So, employers would calculate each Form separately and if one Form added up to 250 or more returns, that Form must file electronically. For example, an employer calculates 200 Forms 1095-C and 60 Forms W-2 neither are required to file electronically because it must be the same Form that adds up to 250. The new IRS proposal would require employers to aggregate the number of different returns it files when determining whether the threshold is met. For returns due in 2022, the employer would aggregate the 200 Forms W-2, 150 Forms 1095-C and one Form 1094-C, for a total of 351 returns. Because the aggregated total of returns due from the employer is at least 250, all the returns must be filed electronically. Another important point is that if an employer maintains five employees who all require a Form1095-C and a Form W-2 totaling ten Forms, that employer is required to file the Form electronically starting in 2023.
The expectation is that the proposed regulations will be finalized this fall. Since the amendments appear to be imminent, employers should act now by identifying whether a vendor is needed to assist with the electronic-filing obligation.
Electronic-Filing Requirements for Specified Returns and Other Documents, 26 CFR Parts 1, 53, 54, and 301, 86 Fed. Reg. 39910 (July 23, 2021): 2021-15615.pdf (govinfo.gov)