Final Regs. Provide Rules for Entities Required to File Electronically

By Alistair M. Nevius, J.D.

In November, the Service issued final regulations on the requirements for electronically filing returns for corporations and other entities (TD 9363). The regulations affect (1) C corporations and S corporations with assets of more than $10 million and that file at least 250 returns during the year; (2) exempt organizations with assets of more than $10 million that are required to file under Sec. 6033 and that file at least 250 returns during the year; and (3) private foundations and Sec. 4947(a)(1) trusts that are required to file under Sec. 6033 and that file at least 250 returns during the year. The regulations were effective November 13, 2007.

The final regulations adopt, with revisions, proposed regulations (REG-130671-04) that were issued in 2005. They require affected organizations to file returns on magnetic media (including electronic filing), as permitted by applicable regulations and IRS guidance.

In theory, the regulations apply to all forms in the Form 1120, U.S. Corporation Income Tax Return, the Form 1120S, U.S. Income Tax Return for an S Corporation, and the Form 990, Return of Organization Exempt from Tax, series of returns, including amended and superseding returns. A member of the Form 1120 series includes, for example, Form 1120-F, U.S. Income Tax Return of a Foreign Corporation. However, certain forms are excluded from the requirement because the IRS currently cannot accept them in electronic format. The Service will publish a list of the forms required to be filed electronically and the forms that are excluded from the electronic filing requirement in form instructions and publications and on its website. The IRS intends for all forms in the above series to be required to be filed electronically eventually, as it develops the capability to accept all forms electronically.

The 250-return threshold applies to returns of any type, including information returns, income tax returns, employment tax returns, and excise tax returns. All members of a controlled group of corporations must file electronically if, in the aggregate, they meet the 250-return threshold.

Affected organizations can request a waiver of the requirement if it would cause undue economic hardship. However, the Service believes that the electronic filing requirement will not have a significant impact on affected entities

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