E-file Mandate for 94x Series Forms — A Guide to Reporting Agents

If you are a reporting agent for a business, the IRS requires you to e-file the employment tax forms in 2024. Here are the key things to ensure to meet your e-file mandate efficiently.

Over the past few years, the IRS has always been encouraging taxpayers, CPAs, and reporting agents to choose e-filing over the traditional way of filing and mailing the forms by paper, considering the remarkable advantages electronic filing offers, such as reduced chances of mathematical errors or missing information, enhanced accuracy in tax calculations, quicker processing, faster refunds, easy access to tax records and much more.

Until the previous tax year (2022), information returns such as 1099s and W-2s are required to be e-filed when filing more than 250 forms. But, starting this 2023 tax year, the IRS has made a significant change to this threshold, mandating the e-filing of 1099s, W-2s, and other information returns when filing over 10 returns in total.

Not just the information returns, the IRS also has certain e-filing requirements for payroll 94x forms as well, specifically for reporting agents. What are they? Let’s unfold.

94x Reporting Agents — An Overview

A reporting agent can be an accounting firm, franchiser, bank, or an individual authorized by their clients (and the IRS) to prepare and e-file employment tax forms on their behalf and comply with IRS Revenue Procedure 2012–32. In addition to tax preparation and filing, reporting agents also take care of tax calculations and payments as well. Typically, they will transmit the returns on their own or use a third-party transmitter.

For these reporting agents, the IRS mandates the e-filing of 94x Forms and certain other forms they may deal with unless the e-filing option isn’t available for that form.

As we approach the year-end payroll tax filing season, here are the key considerations that you should ensure as a reporting agent to comply with the IRS e-file mandate for 94x forms and a successful 94x filing season!

1. Obtain Reporting Agent Authorization

Before we move on to the e-filing part of 94x forms, let’s discuss the basic aspects that you must take care of to ensure compliance.

First and Foremost, as a reporting agent, if you are going to handle the payroll taxes for your clients on their behalf, the IRS wants to ensure that you have been authorized to do so. This is when Form 8655, Reporting Agent Authorization, comes into play.

You must have each of your clients complete 8655 and submit those forms to the IRS along with the Reporting Agent’s list, i.e., the list of taxpayers for whom you are going to handle payroll filings. Please note that you must have an EFIN, i.e., Electronic Filing Identification Number, before submitting 8655.

Upon the acceptance of these 8655 Forms, the IRS will provide you a 5-digit Signature PIN, which is called Reporting Agent PIN. You must use this PIN to e-file 94x forms for your clients to let the IRS know that you are the authorized reporting agent for the corresponding client.

2. Stay Aware of the Changes for the 2023 Tax Year

Staying updated on the changes in tax laws is highly essential for a reporting agent! While the tax forms and regulations are always subject to changes, it’s important that you are always aware of key changes made in reporting requirements before heading into the tax season.

Form 941 Changes for 2024 & 2023 Tax Year:

• The Social Security tax rate for each employer is 6.2%, and the Social Security wage base limit is now $168,600.
• Social Security and Medicare taxes now apply to household workers who are paid $2,700 or more in 2024.
• Social Security and Medicare taxes now apply to election workers who receive $2,300 or more in cash or an equivalent type of compensation in 2024.
• COVID-19-related tax credits for qualified sick and family leave wages have been removed This can no longer be claimed on Form 941.
• Additionally, the IRS has introduced a new, spanish language version of Form 941 called the form 941 (sp).

Which 941 Lines are Impacted in the IRS Form 941?

Several lines on the upcoming Form 941 have been omitted or replaced. Here’s a brief overview:

• Part I, Lines 11a — 11g have been removed.
• Part I, Lines 13a-13i have been removed.
• Part III, Lines 19–28 have been removed.

Though there are no specific changes made to Form 941 for the q4 of the 2023 tax year, the IRS made some minor changes to Form 941, Employer’s Quarterly Federal Tax Return, earlier this year. Here is a recap:

• A new worksheet has been added — Worksheet 2: Credit for Qualified Sick and Family Leave Wages Paid This Quarter of 2023 for Leave Taken After March 31, 2021, and Before October 1, 2021. This will be applicable to businesses that paid qualified sick/family leave wages in the current quarter of 2023 for leave taken after March 31, 2021, and before October 1, 2021.
• The Social Security wage base limit for the 2023 tax year has been declared as $160,200.
• Form 8974, the form attached with 94x forms to claim the qualified small business payroll tax credit for increasing research activities against payroll taxes, had a significant change. The ‘Credit’ has been updated as ‘Credit against the employer share of social security tax’, and the maximum claim amount has been increased to $500,000 from $250,000.

Form 940 Changes:

• State-Specific Credit Reduction: Certain states will see a rise in Federal Unemployment Tax Act (FUTA) taxes due to credit reduction. The impacted states, such as California (CA) and New York (NY), will now face an increased credit reduction rate from 0.3% to 0.6%. Employers in the US Virgin Islands (VI) will also experience a credit reduction rate of 3.9%.
• Electronic Filing for Amended Form 940: A notable update involves the introduction of electronic filing for amended Form 940. In the past, amendments were restricted to paper forms.
• Spanish Version of New Form 940 (sp): A Spanish version of Form 940 (sp) will be accessible for the 2023 tax year.
• Depreciation of Form 940-PR: It’s crucial to note that Form 940-PR is no longer applicable for filing for tax years starting after December 31, 2022.

3. Gather the Accurate Data Beforehand

Next is to have all the data required for filing readily available. By doing so, you can avoid the hassles and intricacies that may arise at the time of form preparation, especially during deadlines.

Not just gathering, but it’s also critical to make sure that the data you have is accurate. You can ensure this through regular audits and validations. In case any discrepancies arise in the data, immediately have a discussion with the respective business and get them sorted out.

4. Calculate Tax Withholdings and Make Payments Accurately

Dealing with numbers is never easy, especially when it’s taxes! Payroll tax filings involve a lot of calculations, starting from credits, FUTA, and withholdings to other tax-due balances.

You must have a clearly organized system and method to make sure the calculations you make are accurate and error-free. Remember, making the tax payments accurately and on time is as crucial as completing the tax filings on time.

5. Adhere to the Deadlines

Over the years, the deadline for filing Form 941, 940, and other 94x forms hasn’t been changed. However, when these deadlines fall on a Saturday, Sunday, or federal holiday, then the deadline may vary. But, thankfully, that isn’t the case this time.

The deadline to file form 941 for 2024 tax year is:

• First-quarter is due on April 30, 2024
• Second-quarter is due on July 31, 2024
• Third-quarter is due on October 31, 2024
• Fourth-quarter is due on January 31, 2025

Form 940 for the 2023 tax year is due by January 31, 2024.

Preparing your returns beforehand can help you save yourself from the last-minute rush!

6. Choose a Reliable Solution to Comply with E-file Mandate

Finally, the most critical aspect — the e-file mandate! As mentioned earlier, the IRS requires the reporting agents to file all the forms listed on Form 8655 (including 941 and 940 Forms) electronically unless the e-filing option isn’t available for that particular form.

This means choosing a reliable filing solution that could perfectly fit your needs is one huge responsibility that you may have. This is exactly when you need TaxBandits!

TaxBandits, the leading IRS-authorized e-file provider, offers a comprehensive solution for businesses, CPAs, and reporting agents to meet their tax filings with complete ease and convenience.

The e-filing solution supports Form 941, 940, 941 Schedule A, 941/940 Schedule R, and many other tax forms that you may need. TaxBandits offers Excel templates for 941 Forms to facilitate a seamless data import process.

As a reporting agent, you can use your 5-digit RA PIN and e-file 94x forms for your clients efficiently with TaxBandits. The easy-to-use e-filing solution can take all the hassle out of your 94x filings and help you meet the year-end season effortlessly.