Small U.S. businesses that file on paper face a new counting rule for information returns required in 2024. Treasury and IRS regulations published February 23, 2023 lower the general electronic-filing threshold from 250 returns to 10 and combine covered form types when testing that limit. A business cannot keep treating its W-2s and 1099s as separate piles to stay below the threshold. The regulation takes legal effect on February 23; this information-return requirement starts with the 2024 filing calendar. [S1][S2]

For example, suppose one business is required to file six original Forms W-2 and four original Forms 1099-NEC during 2024. Those ten covered returns together reach the threshold even though neither form type reaches ten alone. This is an illustrative calculation, assuming no waiver or exemption. The count under section 301.6011-2 includes the information returns listed in its two main categories, not every document a business sends to the tax authorities. Corrected information returns are excluded from that count. For a bookkeeper, the practical change is to bring the covered payroll and other information-return totals together before deciding how to file. [S2]

Corrections follow the original return’s filing requirements. When an original information return must be filed electronically, the corresponding correction must also be electronic. When an original is allowed on paper and was filed on paper, its correction must be filed on paper too. Exclusion from the ten-return count does not create a choice of filing method. Keeping the original filing method with the return record would help a business route a later correction. [S2]

There is already a free IRS option for the 1099 work. The Information Returns Intake System, or IRIS, opened on January 25, 2023 for businesses of any size, without special software. Its launch announcement describes typing data into the portal or uploading a file using a downloadable template, then editing or viewing the information and downloading completed 1099 copies for distribution. IRIS accepts 1099 forms for tax year 2022 and later and allows corrections to returns filed through the platform. The launch notice directs filers to begin enrollment. [S3]

IRIS does not settle the W-2 filing question. The January launch covers the 1099 series; the February regulation directs covered W-2 filings to Social Security Administration procedures. Combining forms for the threshold is therefore not the same as submitting them all through one portal. A small employer can consider the free IRS service for its 1099s while separately arranging its W-2 filing route. Treasury and the IRS acknowledge that the new requirements may burden some paper filers in the short term, so a free portal should not be mistaken for evidence that the transition takes no work. [S2][S3]

Business structure and exceptions still matter. Partnerships with more than 100 partners must file their covered information returns electronically even below the general ten-return threshold, unless an exception applies. The IRS may grant an undue-hardship waiver, with the excess cost of electronic filing over paper named as one principal factor. The rule also allows an exemption where the required technology conflicts with the filer’s religious beliefs, subject to a submission under IRS guidance. A hardship-waiver request must identify the type of filing and the period it covers. [S2]

Source documents

  1. IRS and Treasury issue final regulations on e-file for businesseshttps://www.irs.gov/newsroom/irs-and-treasury-issue-final-regulations-on-e-file-for-businesses
  2. Electronic-Filing Requirements for Specified Returns and Other Documents; TD 9972https://www.govinfo.gov/content/pkg/FR-2023-02-23/html/2023-03710.htm
  3. IRS opens free portal to file information returns; new electronic option can reduce millions of paper Forms 1099 estimated to be filed by businesses in 2023https://www.irs.gov/newsroom/irs-opens-free-portal-to-file-information-returns-new-electronic-option-can-reduce-millions-of-paper-forms-1099-estimated-to-be-filed-by-businesses-in-2023