IRS E-Filing Threshold Drops To 10 For W-2s, 1099s

Do you e-file your W-2s and 1099s? You might have to start, thanks to the new IRS e-filing threshold.

In February 2023, the IRS announced several e-filing changes for 2024. Why? The IRS receives billions of information returns each year. This update will require more businesses to file electronically, which means fewer paper returns for IRS agents to sort through.

If you’re a die-hard paper filer, these changes may affect you. Stay compliant with the IRS by understanding the 2024 e-filing requirements.

What’s The Big Deal?

Information returns are common in business. Businesses with employees are responsible for filing Forms W-2, Wage and Tax Statement. Businesses that hire independent contractors must file Form 1099-NEC, Nonemployee Compensation. Companies may use several other types of information returns, such as Form 1099-MISC, Miscellaneous Information, and Form 1099-DIV, Dividends and Distributions.

If you handle information returns, you must follow IRS instructions—including whether to file electronically. The IRS can assess penalties of hundreds of dollars per return you incorrectly file.

The bottom line: To avoid penalties and stay compliant with the IRS, stay up-to-date on the new e-filing threshold for information returns.

What Were the Requirements Before?

Previously, the e-filing threshold was 250 per return type. This meant businesses with 250 W-2s would need to e-file, or a business with 250 1099-NECs would need to e-file.

What Is The New 2024 E-Filing Threshold?

Under the new IRS rules, you must e-file if you have a total of 10 or more information returns. The new rule impacts the returns you file beginning in calendar year 2024, tax year 2023.

There are two important parts of this new IRS rule. First, the new rule significantly drops the threshold from 250 returns to 10. Second, you must aggregate almost all information return types. This means you must add together your information returns (e.g., W-2s plus 1099-NECs) and e-file if the sum is 10 or more.

Let’s say you had 12 employees during the year and must prepare 12 Forms W-2. Under the new IRS e-filing threshold, you must e-file your forms.

Now, say you’re a small business with six employees and you also hired five independent contractors during the calendar year. As a result, you must file six Forms W-2 and five Forms 1099-NEC. Because the total number of information returns you need to file is more than 10, you must e-file the forms.

What About Corrected Returns?

Amended returns, such as Form W-2c, do not count toward the 10-return threshold, according to the IRS.

The Federal Register states that you must file corrected returns in the same format as the original. For example, you must e-file a corrected form if you were required to e-file the original return. And if you paper filed the original return, you must paper file the corrected return.

So, You Need to E-File—Now What?

If the new IRS rule requires you to start e-filing your information returns, you may have some questions about the next steps.

Filing forms yourself: File Forms W-2 online with the Social Security Administration. You can file Forms 1099 series information returns with the IRS using their new, free online portal, known as IRIS (Information Returns Intake System). Keep in mind that the IRS FIRE system (Filing Information Returns Electronically) will remain available for bulk filing Form 1099s and other information returns through at least the 2023 filing season.

Using full-service payroll software: If you don’t want to handle e-filing or paper filing, you can sign up for payroll services to handle W-2s, 1099-NECs, and 1099-MISCs on your behalf.

What if you can’t e-file? The IRS provides hardship waivers for filers with difficulty meeting electronic filing requirements (e.g., religious beliefs). You can complete Form 8508, Application for a Waiver from Electronic Filing of Information Returns, to request an electronic filing waiver for Forms W-2, 1099, and other forms. Consult the IRS for more information.