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IRS Changes W-2 Filing Requirements for Tax Year 2023

By: Patti Callaway

As the tax year 2023 approaches, employers across the United States are gearing up for changes in the W-2 filing requirements set forth by the Internal Revenue Service (IRS). The IRS recently announced they have adjusted the criteria for electronic W-2 filing, potentially impacting a significant number of small employers. Understanding these updates is crucial to avoid penalties and ensure a smooth filing process.

Understanding W-2 Filing Requirements

Previously, employers were required to electronically upload their W-2 files if they had 250 or more W-2s they were filing. However, starting this year, that threshold has significantly decreased to just 10 or more W-2s. This means any employer who has ten or more W-2 forms must now be capable of electronically uploading the required information to the IRS. While many larger organizations have been e-filing for years, this change could pose challenges for smaller employers who are accustomed to mailing in their W-2 and W-3 files at year-end.

The shift towards electronic W-2 filing is driven by the IRS’ commitment to modernizing its operations and streamlining the tax filing process. By embracing technology, the IRS aims to improve data accuracy, processing efficiency, and overall compliance with tax regulations. Electronic filing not only reduces the risk of errors associated with manual data entry but also expedites the processing of tax returns, enabling taxpayers to receive their refunds faster.

For employers who have not yet adopted electronic W-2 filing, the transition may require some adjustments. Most payroll software already has the capability to support e-filing, but it may be necessary for clients to make some configurations to enable this feature. It is essential for employers to verify that their payroll software is up-to-date and compliant with the new requirements.

While the IRS is actively working on an option to facilitate file uploads, it remains the employer’s responsibility to ensure that the electronic W-2 file adheres to all the correct specifications. Preparing the file with the appropriate format and data can be a daunting task for those unfamiliar with e-filing procedures. Seeking assistance from experienced professionals or tax service providers like KPM can prove beneficial during this transition period.

The IRS’ recent post-release changes further highlight the importance of electronic filing. The agency specified that several other forms, in addition to Forms W-2, are also subject to the electronic filing mandate if employers are submitting 10 or more of these forms. The list includes various forms related to information returns, such as Form 1042-S, the Form 1094 series, Form 1095-B, Form 1095-C, Form 1097-BTC, Form 1098, Form 1098-C, Form 1098-E, Form 1098-Q, Form 1098-T, the Form 1099 series, Form 3921, Form 3922, the Form 5498 series, Form 8027, and Form W-2G.

In addition, the IRS clarified that Form W-2c, used for correcting errors on previously filed W-2 forms, is also required to be filed electronically if the original W-2 was submitted electronically. This adjustment ensures that corrections and amendments to electronic filings are also done through the digital platform, maintaining consistency in the electronic filing process.

As an employer, you must be aware of the changes in W-2 filing requirements for tax year 2023. The lowered threshold of just 10 or more W-2s necessitating electronic filing may significantly impact small employers who have yet to adopt this practice. The IRS’ commitment to electronic filing is part of a broader initiative to modernize tax operations and enhance efficiency. While the transition may pose challenges, seeking guidance from experienced professionals like KPM can make the process smoother. Contact us with questions.

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