The Internal Revenue Service has released regulations that require certain large US corporations and tax-exempt organizations to electronically file their income tax or annual information returns beginning in 2006.
The regulations require that corporations with total assets of $50 million or more file their Forms 1120 and 1120S electronically for the 2005 tax year. The forms are due to be filed in 2006.
In addition, tax-exempt organizations with total assets of $100 million or more will be required to file their tax year 2005 Forms 990 electronically.
Beginning in 2007, the electronic filing requirement will be expanded to include the tax year 2006 tax returns of corporations and tax-exempt organizations with $10 million or more in total assets.
Private foundations and charitable trusts will also be required to electronically file their Forms 990-PF electronically regardless of their asset size.
The electronic filing requirements only apply to entities that file at least 250 returns, including income tax, excise tax, information and employment tax returns, during a calendar year.
Welcoming the expansion of the agency’s electronic services, IRS Commissioner Mark W. Everson noted that: “Electronic filing will help speed tax processing and reduce audit cycle time. Taxpayers will benefit from electronic filing by resolving uncertainties earlier. This is important because audits, on average, take five years to complete for large corporations.”
He added: “Speeding processing also will help identify emerging trends and abuses earlier, enabling the IRS to address problems before they get out of hand.”
The IRS explained that it currently has no plans to extend mandatory e-filing to small and mid-sized business, although all taxpayers are “strongly encouraged” to adopt e-filing.
By 2007, the IRS expects that more than 20,000 large corporate taxpayers and up to 10,000 tax-exempt entities will be covered by the electronic filing requirement.
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