E-filing Threshold Drops to 10 for W-2s, 1099s, etc.

Photo of two individuals reviewing data.

The e-filing threshold has dropped. Many small businesses that are used to manually preparing and filing Forms W-2, 1099-MISC, and similar “information reporting” forms will find that they now are required to file such forms electronically. This occurs because beginning with the 2023 forms that are due in early 2024, the e-filing threshold has dropped significantly. Since 1998, manual filing was allowed unless an employer filed at least 250 information reports. However, for 2023 reports, e-filing is required for as few as 10 such filings. For this purpose, all information reports are added together, including (but not limited to) Forms W-2, 1099-MISC, 1099-INT, and 1099-NEC. If the headcount reaches 10 or more, you are required to e-file. (For example, if you must prepare eight Forms W-2 and two Forms 1099-MISC, your combined total is ten and you therefore must e-file each of them.)

As usual, there is no carrot, but the IRS offers a formidable stick. Penalties for failing to properly file (which includes filing manually when e-filing is required) range from $60 to $630, depending on a number of factors, including which form(s) are included in the bungle, how fast the error is corrected, and whether the mishap is believed to be (in the IRS’ opinion) intentional or accidental.

A lot of businesses will need to file electronically for the first time due to this rule, and many of them undoubtedly will at this time look for outside help preparing these forms rather than continuing to prepare them internally. Business owners and managers would be wise to engage those third-party processers now, rather than late next month when the deadline is upon us.