The Department of the Treasury and the Internal Revenue Service issued final regulations amending the rules for filing IRS returns electronically. The final regulations set new, lower thresholds for when employers are required to e-file, and thus reduce opportunities to file by paper. The final regulations go into effect for filings due in 2024.
Applicable Large Employers, as defined by the Affordable Care Act, are required to file Forms 1094-C and 1095-C to provide the IRS with information about health care offered to employees. Under the current regulations, employers are required to electronically file Forms 1094-C and 1095-C if they are filing 250 or more of these returns. The new final regulations drastically reduce the threshold number to just 10 returns in a calendar year.
The final regulations also change the method of counting the number of returns. Whereas, the current regulations apply the 250-return threshold separately to each type of information return, the new final regulations combine all types of returns when counting whether the employer meets the 10-return threshold. An employer must count the total number of all types of returns it files with the IRS for a particular tax year, which include but is not limited to, the number of Form 1094-C, Form 1095-C, Form W-2, Form 1099, Form 940, and Form 945.
The impact of these changes is that nearly all public agencies will need to file returns electronically with the IRS. Only very small employers will still have the option to file by paper. According to the IRS, there has been tremendous growth in the use of e-filing in recent years and the IRS would like to reduce the volume and associated costs and burdens of paper filings.
The final regulations carve out a hardship waiver for employers that would experience hardship in complying with the e-filing requirements.