Unless you’re already filing all your company’s tax and information returns electronically, get ready to feel a little nudge from IRS.
The Taxman just released its progress report on its lofty goal of having 80% of major tax returns e-filed.
And it’s getting closer – the Service predicts it will hit almost 73% in 2013.
Close … but apparently not close enough. Since its large jump from 2010 to 2011, increases have only logged around two percentage points a year.
And while individual tax returns represent the bulk of e-file potential, IRS just acknowledged it won’t be able to reach its goal without the help of business taxpayers.
That’s where you and your finance staffers come in. Specifically IRS identified two major areas where there’s serious room for improvement that land square on Finance’s plate:
- employment tax returns, and
- information returns, specifically 1099s.
Which means that both Payroll and A/P could soon be feeling new heat to prune the paper from its processes. Here’s what you need to know.
IRS’s new plan of attack
In all fairness, businesses did step up significantly in 2013 as far as their e-file efforts – corporate returns were up 14% this year. But they still lag way behind individual return filers.
That’s why IRS is turning a focus on the two types of corporate returns where it can make up the most ground.
The first one: Employment tax returns. Currently, the largest e‐file gap remains in the employment return family, primarily Forms 940 and 941 (Forms 94x).
So how does IRS plan to get more of your peers to e-file these key returns? The Electronic Tax Administration Advisory Committee is recommending an incentive program for employers.
Specifically, it wants to expand the definition of the first time abatement (FTA) to include the “Promotion of Electronic Filing.”
If IRS takes that advice, your company would be able to e-file the 94x series without worrying that an error on the part of you or your finance staffers would slap you with penalties the first time you try it.
We’ll be sure to keep you updated.
The second area the Taxman will likely take action on is to increase the number of 1099s filed electronically.
Specifically, the form you likely file the most — the 1099-MISC — currently falls well below IRS’s 80% goal at 64% projected for 2013. Almost 25 million are still filed in paper form.
Again, the Electronic Tax Administration Advisory Committee has a proposed plan of action. This one is a multi-pronged approach.
It wants IRS to work with both withholding agents and service providers to remove any current barriers to facilitate electronic filing as the preferred filing method by:
- implementing electronic filing of Form 1099‐MISC via the IRS website, or
- expanding awareness and access to free or cost‐effective electronic filing solutions.
No word on which route IRS will take, but it knows it has to do something fast.
Of course this effort you’ll likely feel if you’re a smaller business since mandatory e-filing kicked in for companies with more than 250 information returns years ago.
The good news is, there’s no talk of any new mandates coming down the pike. For now, IRS seems to want to take a kinder, gentler, more taxpayer friendly approach.
Stay tuned. We’ll keep you posted on all e-file initiatives.
Info: The Electronic Tax Administration Advisory Committee report.
