For tax year 2023 information returns that will be filed in early 2024, the IRS has lowered the e-filing threshold from a total of 250 returns to a total of 10 returns. What does this mean for your small business? It means most small businesses will now be required to e-file their 1099 forms as well as their W-2’s with the government. To figure out if you must e-file, add the number of information returns including W-2’s and any type of 1099’s you will issue for tax year 2023. If you use a third-party payroll service that processes W-2’s for you, don’t forget to count those in your total! If the total is 10 or more, you will no longer be allowed to file paper returns with the IRS or the SSA but instead will be required to file electronically even though you may continue to issue your payees or employees paper copies of these forms.
The good news is that there are many sources you can use to file electronically with the federal government. There are a host of third-party services which are usually inexpensive and many not only e-file the forms with the government but will also print and mail copies to your recipients, saving you from having to buy any paper forms at all. Check the platform you’re using to see if they will also e-file with your state(s) if required. The IRS also offers a free e-filing service. See https://www.irs.gov/filing/e-file-information-returns. As always, consult your tax professional for questions about this change.