IRS Releases Proposed E-filing Regulations

February 2005

Ready or not, e-filing is coming. On January 12, 2005, the IRS published proposed regulations on required e-filing. The proposed regulations provide two thresholds for determining whether a corporation or tax-exempt organization must file electronically: (1) the number of returns the organization files with the IRS annually and (2) asset size. Of course, filers who do not meet these criteria are still welcome to submit their returns electronically.

Number of Returns Filed Annually

The proposed regulations apply only to entities that file at least 250 returns during a calendar year. The term returns includes income tax, excise tax, information, and employment tax (including Form W-2) returns. Thus, a nonprofit that files a Form 990 and Forms W-2 for each of its 249 employees would fall into this category.

Asset Size

If a corporation or exempt nonprofit files at least 250 returns a year, its total assets determine whether it will be required to file electronically. Here is the schedule for tax-exempt organizations:

2006–organizations with total assets of $100 million or more must file their tax year 2005 Forms 990 electronically.
2007–organizations with $10 million or more in total assets must file their tax year 2006 Forms 990 electronically. Private foundations and charitable trusts of all sizes must file their tax year 2006 Forms 990-PF electronically.

The IRS anticipates that as many as 10,000 tax-exempt nonprofits will be required to e-file their 990s in 2007.

Public Comment and Hearing

The public is welcome to submit written comments on the proposed regulations; comments must be received (not postmarked) by February 28, 2005.

Through the IRS Web site–go to http://www.irs.gov/taxpros/article/0,,id=132756,00.html and click on the "Submit comments" link under "Returns Required on Magnetic Media."
By mail–CC:PA:LPD:PR (REG-130671-04), Room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044.
By hand or courier–CC:PA:LPD:PR (REG-130671-04), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m.

A hearing on the proposed regulations will be held at the IRS on March 16, 2005. Send written requests to speak at the hearing and an outline of topics to be discussed to the mailing or hand/courier addresses above; requests must be received by February 28.

More Information

IRS Press Release, January 11, 2005
Proposed Regulations, January 12, 2005 (see pages 1-2 for instructions on submitting comments and attending or speaking at the hearing)
Approved Software Providers for Forms 990 and 990-EZ