IRS Promotes Electronic Filing of Payroll Tax

A sign outside the Internal Revenue Service building is seen in Washington on May 4, 2021. Patrick Semansky/AP Photo

The Internal Revenue Service (IRS) asked businesses to file payroll tax returns due by the end of this month electronically, insisting it was “secure” and “accurate.”

“While paper filing is available, the IRS strongly encourages e-filing” for the quarterly payroll tax return due on Oct. 31, the agency said in a Thursday press release. “The IRS acknowledges receipt of e-filed returns within 24 hours, giving employers reassurance that their return was not misplaced or lost in the mail. E-file users also receive missing information alerts.” The agency claimed that e-filing was the “most secure, accurate method to file returns” while also helping filers save time.

“E-filing is easy with auto-populating forms and schedules and a step-by-step process that performs calculations for the user.”

Employers can either self-file or hire a tax professional. If choosing to self-file, employers may have to apply for an online signature PIN to e-file the employment tax forms. This can be done via the tax software package used by the company. The agency has published a list of IRS-approved software online.

To apply for a PIN, the person should be a (a) sole proprietor, (b) a partner with 5 percent or more interest in a partnership or a person authorized to act on behalf of the entity, (c) the president, vice president, secretary, or treasurer of a corporation, or (d) the principal for an entity that is not a sole proprietorship, partnership, or corporation and is authorized to act on its behalf in legal or tax issues.

The PIN will designate the individual as an IRS Authorized Signer, granting the person the authority to sign and act in tax matters on behalf of the entity. In addition to applying for an online signature PIN, employers may also have to scan and attach Form 8453-EMP when they self-file.

If an employer chooses not to self-file and instead opts to use a tax professional, they can search for an authorized IRS e-file provider.

The Oct. 31 deadline is not applicable to all businesses as the IRS has granted an exemption for employers located in nine federally declared disaster areas.

Employers in Vermont have time until Nov. 15 to file and pay. Businesses in Maine, South Carolina, and Massachusetts have time until Feb. 14, 2024. The deadline for employers in certain parts of Georgia, Florida, Hawaii, and Louisiana is also Feb. 15 next year.

In addition, employers affected by the terror attacks in Israel have time until Oct. 7, 2024, to file and pay taxes.

IRS’ E-Filing Push

The new IRS guideline encouraging e-filing payroll tax returns comes as the agency recently made it mandatory for businesses to report transactional receipts of over $10,000 through online filing. Such transactions are reported via Form 8300.

“Beginning Jan. 1, 2024, businesses must e-file all Forms 8300 if they’re required to file at least 10 information returns other than Form 8300,” the IRS said Aug. 30.

For instance, if a business files five Forms 1099-INT and five Forms W-2, they should e-file all their returns electronically for the year, including Forms 8300. If a business files less than 10 forms, excluding Forms 8300, they can opt not to e-file.

Earlier in February, the IRS and the Department of the Treasury issued final regulations amending rules for filing business returns electronically. Beginning 2024, certain filers will be required to e-file the returns.

The rule will affect “filers of partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns.”

The rule eliminates the e-filing exception for income tax returns of corporations which report less than $10 million in total assets by the end of a taxable year. Partnerships with over 100 partners will be required to e-file their returns.

According to IRS data, close to 82 percent of all corporate income tax returns in 2021 were e-filed. For partnership tax returns, the e-filing rate was almost 90 percent.

The IRS is expanding its digital filing push for individual taxpayers as well. The agency is set to launch its e-filing program called Direct File, with some individual taxpayers from certain states allowed to use it beginning next year.

The Direct File program has come under criticism. The IRS initiated the Direct File pilot program without getting congressional authorization.

Officials also chose a left-wing think tank, Washington-based New America, to conduct a $15 million “independent review” of the agency’s proposed online tax-filing system. Moreover, New America had earlier supported the idea of the IRS launching its own online tax filing service.

The push for e-filing business and individual taxes is part of the IRS' “paperless processing initiative” announced in August.

“The IRS is launching an ambitious plan to ensure that by Filing Season 2024, taxpayers will be able to go paperless if they choose to do so, and by Filing Season 2025, the IRS will achieve paperless processing, digitizing all paper-filed returns when received,” the agency said in an Aug. 2 press release.

“In effect, this means all paper will be converted into digital form as soon as it arrives at the IRS.”

The paperless processing initiative is expected to “eliminate up to 200 million pieces of paper annually, cut processing times in half, and expedite refunds by several weeks.”