IRS Provides Guidance on Electronic Filing Exemptions, Waivers, and Rejections

(Parker Tax Publishing August 2023)

The IRS issued a notice addressing the availability of administrative exemptions from the requirement to file certain returns and other documents in electronic form as well as the availability of information about the procedure to request a waiver of the requirement to file electronically Forms 1120, 1120-S, and 1120-F, and information about failed attempts to file electronically Forms 1120 using IRS filing systems. In addition, the IRS obsoleted Notice 2010-13, which provided the waiver request procedures for Forms 1120, 1120-F, 1120S, 990, and 990-PF. Notice 2023-60.

Background

The Taxpayer First Act (TFA) (Pub. L. 116-25) amended Code Sec. 6011(e) by amending Code Sec. 6011(e)(2) and adding Code Sec. 6011(e)(5) to authorize the IRS to prescribe regulations that decrease the number of returns a filer may file without being required to file returns and other documents electronically. Under this authority, the IRS may require any person who must file at least 10 returns during a calendar year to file the returns electronically (electronic filing requirement). Prior to the TFA, the IRS was authorized to apply the electronic filing requirement only for persons required to file at least 250 returns during the calendar year. In addition, the TFA amended Code Secs. 6011 and 6033 with respect to certain returns required to be filed by tax-exempt organizations by requiring that all such returns be filed in electronic form.

In February of 2023, the IRS published T.D. 9972, which contained final regulations providing updated electronic filing requirements generally applicable beginning January 1, 2024 (updated electronic filing regulations). The updated electronic filing regulations allow certain waivers of and administrative exemptions from the electronic filing requirement. Regulations mandating electronic filing that are currently applicable allow for waivers in certain circumstances prior to January 1, 2024.

The updated electronic filing regulations provide for certain administrative exemptions from the electronic filing requirement. Reg. Secs. 301.6011-2 (general electronic filing requirement), 301.6011-3 (for partnership returns), 301.6011-5 (for corporate income tax returns), and 301.6037-2 (for returns of electing small business corporations), as amended by the updated electronic filing regulations, provide for an administrative exemption from the electronic filing requirement for filers of the returns or other documents described in those regulations for whom using the technology required to file electronically conflicts with their religious beliefs (religious exemption).

In addition, certain provisions of currently applicable regulations and the updated electronic filing regulations authorize the IRS to grant certain waivers of the requirement to file electronically certain returns and other documents in cases of undue hardship (hardship waiver). Certain provisions of the updated electronic filing regulations also authorize the IRS to provide other administrative exemptions from the electronic filing requirement to promote effective and efficient tax administration.

In Notice 2010-13, the IRS provided the procedure for corporations, electing small business corporations, and organizations required to file returns under Code Sec. 6033 to request a waiver of the requirement to file electronically Form 1120, U.S. Corporation Income Tax Return; Form 1120-F, U.S. Income Tax Return of a Foreign Corporation; Form 1120-S, U.S. Income Tax Return for an S Corporation; Form 990, Return of Organization Exempt From Income Tax; Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as a Private Foundation; and returns, amended returns, and superseding returns in the Form 1120 series and Form 990 series when required by regulations and IRS publications. Notice 2010-13 also provided instructions regarding timely filing of Form 1120, Form 1120-S, Form 1120-F, Form 990, and Form 990-PF on the IRS's Modernized e-File (MeF) system after attempts to file electronically on the MeF system are rejected.

Updated Guidance on Electronic Filing Exemptions, Waivers, and Rejections

In Notice 2023-60, the IRS advised that filers for whom the technology required to file electronically conflicts with their religious beliefs should notify the IRS that they qualify for a religious exemption in advance of filing returns and other documents by filing a Form 8508, Application for Waiver from Electronic Filing of Information Returns. After filing the Form 8508, filers who qualify for a religious exemption should file returns and other documents in paper form, in accordance with paper filing requirements provided by applicable IRS revenue procedures, publications, forms, instructions, or other guidance. The IRS noted that the religious exemption is available both before and after the applicability date of the amendments to Reg. Secs. 301.6011-2, 301.6011-3, 301.6011-5, and 301.6037-2.

The IRS also stated that the procedures for seeking a hardship waiver of the electronic filing requirement may be found in applicable IRS revenue procedures, publications, forms, instructions, and other guidance, including postings to the IRS.gov website. The same is true, according to the IRS, for the procedures for claiming an administrative exemption, or for requesting a waiver of the electronic filing requirement for Forms 1120, 1120-S, and 1120-F.

Additionally, the IRS stated that because Code Sec. 6033, as amended by the TFA, requires any organization with an obligation to file a return under Code Sec. 6033 to file the return in electronic form, the procedure to request a waiver of the electronic filing requirement as described in Notice 2010-13 no longer applies to Form 990 and Form 990-PF series returns. In addition, the IRS noted that instructions regarding timely filing and for correcting returns that are rejected during attempts to file electronically using the IRS electronic filing systems may be found in IRS publications specific to each IRS electronic filing system; for example, Publication 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters, and Publication 5717, Information Returns Intake System (IRIS) Taxpayer Portal User Guide. For the foregoing reasons, Notice 2023-60 obsoletes Notice 2010-13 because it is no longer necessary.

For a discussion of the electronic return filing requirements, see Parker Tax ¶250,130.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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