This blog was last updated on November 2, 2023
During our recent “Spooky Season Tax Updates” webinar, we discussed the most important changes that will affect filers in the upcoming tax reporting season. From a lowered e-filing threshold to Transmitter Control Code (TCC) requirements, the implications of changing IRS and state government reporting rules and regulations can be tricky to combat. But don’t worry: there’s no need to be afraid.
With another tax reporting season approaching quickly, familiarizing yourself with these recent changes is crucial to staying in compliance. We compiled the top questions and answers on ensuring a successful tax reporting season from the webinar.
Do I need to file my information returns electronically for 2023 reporting?
The IRS lowered the electronic filing threshold for 2023 returns in TD 9972. The new threshold requires all businesses to file electronically if they are filing 10+ information returns, counted in the aggregate. Previously, the threshold was 250+ returns and was applied separately to each form type. Form 1042 is included in the electronic filing mandate for 2023 returns. Unlike many other information returns, Form 1042 must be filed electronically through the IRS Modernized e-File (MeF) system. This process is strenuous and takes many business resources to complete.
Can Sovos electronically file Form 1042?
Yes, Sovos offers an e-filing service for Form 1042 and is an approved IRS Modernized e-File (MeF) Business Provider for 1042 returns.
Do I need a new TCC to electronically file my 2023 information returns?
A TCC is a five-digit identifier that businesses use when transmitting information returns electronically to the IRS. If your business files information returns electronically with the IRS, you should have established a new ID.me account and associated that account with an existing TCC before August 1, 2023. The IRS deactivated all existing TCCs that were not connected to an ID.me account as of August 1. If you missed that deadline, businesses must apply for a brand new TCC before filing season.
If I use Sovos for filing, do I still need a TCC?
If you utilize Sovos to transmit your information returns, you do not need to establish a new TCC. Our comprehensive solutions can file on behalf of your business so you can spend less time and resources trying to understand ever-changing regulations.
What is an ID.me account and how is it used?
The IRS, Electronic Federal Tax Payment System (EFTPS) and Social Security Administration (SSA) have all recently transitioned many of their access systems to require an ID.me account to login. Establishing an ID.me account requires providing a photo ID and personal information. You will then establish a channel by which ID.me can authenticate your identity (e.g., email, phone number) each time you log in to a given platform.
If you plan to access IRS systems such as File Information Returns Electronically (FIRE) or Information Returns Intake System (IRIS), an SSA account or EFTPS, you will need to establish an ID.me account before doing so. Do this before filing season begins to make sure there are no technical issues when filing starts.
What is the new IRS IRIS System and how is it different from FIRE?
The IRS launched its new IRIS system in late January 2023. Currently, the system supports Form Series 1099 and eventually will replace the existing FIRE system altogether. However, the timeline for decommission of the FIRE system has not been announced. If you utilize the FIRE system, you should expect changes to your processes over the coming years. The new IRIS system does not follow the Pub 1220 Format, which could impact how you pull information from your accounting and operating systems drastically. However, utilizing the FIRE system is still an option for 2023 reporting.
Are any new states participating in the Combined Federal State Filing (CF/SF) Program for 2023 reporting?
The latest update of Publication 1220 stated that Pennsylvania and Washington D.C. will both participate in the CF/SF Program for 2023 reporting. However, Sovos has inquired with both jurisdictions and has learned Pennsylvania will not be participating in the CFS program for 2023 reporting. The CF/SF program is an IRS program used to share information with states directly to alleviate some direct state reporting requirements, though many states have requirements in addition to CF/SF filings. However, please verify with states directly if they participate in the program or not.
Take Action
Watch the full on-demand “Spooky Season Tax Updates” webinar to learn more about tackling the terrors of the 2023 reporting season.
Have more questions? Connect with one of our experts.
