Small business employers have plenty of day-to-day responsibilities without needing to worry that their business stays compliant with changes from the Internal Revenue Service. In 2023, the IRS made significant changes to the electronic filing process for businesses and what is expected each tax year. The changes resulted in:
- Lowering the e-file threshold from 250 returns to 10 information returns
- Transitioning from optional e-filing to mandatory compliance
- More small businesses affected by e-file requirements
The applied changes started for tax year 2023 filings that were filed in 2024 and have continued since that calendar year. Along with affecting small business employers, it also required many of the bookkeepers or accountants who manage multiple clients to reframe their tax management.
Small businesses who invested in or already owned comprehensive W-2/1099 software were at an advantage. An intuitive, affordable system like our 1099-etc software operates as a powerful, modular suite of tools. We designed our base program and its six optional add-on modules with small businesses in mind, simplifying the way that people prepare and file:
- End-of-year tax forms
- Quarterly unemployment forms
- “Live” and after-the-fact payroll
- Affordable Care Act forms
- Foreign person’s U.S. source income forms
What are the Latest Small Business E-File Threshold Changes?
There are not many new changes when it comes to what small businesses are responsible for with their electronic filing thresholds. It is mostly important that you are aware of the revisions made in the last several years, especially if you need to refer back to past forms and make an amendment.
The key highlights to remember are:
- Your business must file 10 or more overall information returns
- Electronic filing applies across all form types combined (aggregation rule)
- E-Filing is necessary for W-2s, 1099 series, and other information returns
- The new 10-return count applies to original and corrected forms
- Certain employment tax forms (941 or 940) are excluded
Switching to electronic filing is a safe choice for businesses of any size. The best accounting and payroll software provides its users with payer backup and restore features to prevent an individual or business filer from losing sensitive data.
There is a less than 1% error rate for e-filed tax returns versus 21% for paper returns.
Who is Most Affected by E-File Threshold Adjustments?
Many types of tax filer are noticeably affected when there are e-file threshold changes instituted by the IRS. Small businesses and accountants can face challenges if a threshold or unexpected regulatory change occurs for the next tax year.
The small businesses who may be disproportionately affected are ones with:
- A smaller number of employees
- A combination of W-2 employees and 1099 independent contractors
Accountants and bookkeepers who may feel a temporary or lasting strain are ones who:
- Track totals for multiple clients
- Have limiting software that cannot scale for increased compliance responsibilities
What Forms Must You Include in the 10-Return Count?
Given that the e-filing requirements include most information returns, you will need to factor in how many submissions there will be of:
- Form W-2
- Form 1099-NEC
- Form 1099-MISC
- Form 1099-INT
- ACA forms (1095 series)
Remembering the aggregation rule is essential. The count is the combined total, not per form.
How Small Businesses Stay Compliant with E-File Changes
Introducing solutions so that you or your small business clients stay compliant amidst any e-file threshold changes should not be a time-consuming process. E-Filing tools are more accessible than ever whether you use IRS systems like IRIS or FIRE, or you purchase your own approved system from a payroll provider.
It is just as important to stay aware of all the deadlines that might affect your business’s ability to stay compliant and not face penalty fees. Software like our 1099-etc system comes with tools, such as a Common Payee File so users can pick a payee across payers or 1099 forms without needing to re-enter the same information multiple times.
Staying Compliant with AMS Software
There is no need to take our word for it. Download our free 1099-etc Demo software and see exactly how our system provides e-filing solutions for small business users. Our software has two distinct options: E-File Direct (add-on module) or E-File Services (via third-party vendor). Enter your real data into the demo and see how the system would handle it.