The IRS has issued proposed regulations in REG-102951-16; 83 F.R. 24948-24950 that will require a larger number of taxpayers to fill all information returns electronically.
Currently Reg. §301.6011-2(c) provides that the following taxpayers do not have to file information returns electronically:
(1) Low-volume filers/250-threshold
(i) In general.
No person is required to file information returns on magnetic media unless the person is required to file 250 or more returns during the calendar year. Persons filing fewer than 250 returns during the calendar year may make the returns on the prescribed paper form, or, alternatively, such persons may make returns on magnetic media in accordance with paragraph (b) of this section.
(ii) Machine-readable forms.
Returns made on a paper form under this paragraph (c)(1) shall be machine-readable if applicable revenue procedures provide for a machine-readable paper form.
(iii) No aggregation.
Each type of information return described in paragraphs (b)(1) and (2) of this section is considered a separate return for purposes of this paragraph (c)(1). Therefore, the 250-threshold applies separately to each type of form required to be filed.
The IRS originally included the “no aggregation” rule in the regulation to reduce the burden and cost of complying with the regulation by small taxpayers. But the IRS now appears to have concluded with electronic filing of various types of returns becoming the norm that there is not a significant burden to require taxpayers that file more than 250 information returns of all types to file those returns electronically.
The IRS is going to remove the above “no aggregation” rule and a new required aggregation rule will be added at Reg. §301.6011-2(b)(4) which will read as follows:
(4) Aggregation of returns. For purposes of determining whether the number of returns a person is required to file meets the 250-return threshold under paragraph (c)(1)(i) of this section, all types of returns covered by paragraphs (b)(1) and (2) of this section required to be filed during the calendar year are aggregated. Corrected returns are not taken into account in determining whether the 250-return threshold is met.
The proposed regulation would also require corrected returns to be filed electronically for taxpayers who are required to file information returns electronically.
The regulations, if adopted as final, are scheduled to apply as noted below in the preamble:
These proposed regulations will be effective on the date of the publication of the Treasury Decision adopting these rules as final in the Federal Register. However, to give information-return filers sufficient time to comply with these regulations, these proposed regulations will not apply to information returns required to be filed before January 1, 2019. Accordingly, these proposed regulations provide that §§ 301.6011-2(b)(4) and 301.6721-1(a)(2)(ii), as amended, will be effective for information returns required to be filed after December 31, 2018. Section 301.6011-2(b)(5), as amended, will be effective for corrected information returns filed after December 31, 2018.