In IRS regulations proposed on July 23, 2021 (see Federal Register publication), e-filing thresholds for W-2 filings have been recommended to be reduced from the longstanding 250 count down to 100 effective this year (i.e. early 2022 filing for 2021). For 2022 (filings in early 2023), the threshold is proposed to decrease to 10.
There is currently a comment period to the proposed changes that will end on September 21 and it is expected that thereafter, this change will be implemented in final regulations.
Many states have already had requirements of much less than 100 state income tax forms and some are already at 10 (plus a few that require e-filings only). It makes sense to finally streamline some of these requirements so that the federal threshold is at a similar lower level and that should provide for much more efficient processing.
In determining the 100 (and soon 10) thresholds, note that the proposed regulations now for the first time requires that you aggregate ALL of certain forms you will be filing (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) in determining whether the threshold has been met, with possible fines for non-compliance.
So for most accounting software users, the forms that will factor into the threshold determination is the combination of 1099-NEC and W-2 forms. These forms are often prepared by different departments or individuals within the same organization. Form 1099-NEC are for non-employees (which last year replaced prior 1099-MISC reporting), i.e. your service type vendors or similar outside consultants and the like. You do not issue a 1099-NEC to an employee. Accounts payable transactions are often handled by a different person than the staff member handling payroll within a given organization. There will have to be communication between these staff or between different departments to see if the threshold is met, especially this year, rather than considering them as separate, standalone filings. As the threshold then drops in the future, companies should just plan on e-filing going forward even if their state doesn't have an e-filing requirement because it is faster and easier than ever, and because it may offer greater security, and because if you are in a state that does require filings, chances are that you may need to e-file to meet those requirements anyway.
The 2021 1099-NEC form has also changed to a 3 parts per page form rather than a 2-up form. For those still planning on printing these in 2021, we will be accordingly updating the "Print 1099 Forms" program in Advanced Accounting. These forms will be available from our forms supplier (Dynamic Systems, 800-782-2946) who also supplies compatible Advanced Accounting check and other forms.
We already have had a solution for the past several years with respect to the e-filing of W-2 and related forms (both for IRS and for all states that require them). We are looking at adding 941 and 1099-NEC e-filings as well, through a common interface involving the same integration partner and through a similar web site interface.
In addition we are planning on expanding the number of employee deductions in the payroll (PR) module from the current limit of eight (six of those global as established in the enter/change payroll GL interface, i.e. SY-D) to eleven (nine global).
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