I was speaking with a client last week who informed me that his company is planning on using a combination of e-filing and paper filing for their 2023 tax forms. He told me, "We have more than ten W2s to file but fewer than ten 1099s, so we'll file the W2s electronically and file the 1099s using paper forms." This did not surprise me because in past years when the filing threshold for paper was 249 or fewer of each tax form. For example, if you had 230 W2s and 30 1099s (NEC and/or Misc.) for the tax year 2022, you could file with paper forms because the total number when taken individually did not exceed the previous 250 forms e-filing threshold. I explained that since they were already over the paper filing limit for W2s, regardless of whether the number of 1099s is fewer than ten, then e-filing is mandatory. Before this tax year, the combined total number of paper forms could be greater than 250 in aggregate and you could still file paper forms. This year, the aggregated rule applies to the following forms: 1042-S, 1094 series, 1095-B, 1095-C, 1098, 1098-E, 1098-T, 1099 series, 5498 series, 8027, W-2G, W-2, 499R-2/W-2PR, W-2VI, W-2GU, W-2AS, 1098-C, 1098-Q, 3921, 3922, 1097-BTC or any combination thereof.
Now that we are clear on what is meant by ten forms in "aggregate", this begs the question of what to expect from the IRS when mailing ten or more paper forms. I turned to our forms provider Nelco for an answer. The response I received included this sentence. "Indication has been that filing via paper when e-file is required would count as not being filed correctly and would be subject to the same per return penalty as if forms were not filed at all." To confirm, I dug a little deeper into the regulation and found this nugget, "The proposed regulations provide that if a filer fails to file a return or report electronically when required to do so by the regulations, the filer is “deemed” to have failed to file the return or report." Therefore, if the e-filing threshold of ten or more forms is not met, then a failure-to-file penalty will likely be assessed. Whether or not the IRS will assess a penalty for the first offense after the 2024 filing deadlines have passed is unknown, but why risk it? When you have ten or more forms of any type listed above means that e-filing is required - period!
With the recent availability of the SYMPAQ End-of-Year update for 2023, we have you covered regardless of whether you are eligible to file with paper forms or are required to file electronically using the built-in interface to Yearli. While we promote software compliance with the Federal Acquisition Regulations and with DCAA guidelines, keeping abreast of IRS rules and regulations never takes a back seat.