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Jun 04, 2024
Tax Solutions: SME Corner Series - The Future of Tax Filing: Embracing Modernized e-Filing
Preparing for the Digital Age at the IRS…because it's here.
The Inflation Reduction Act of 2021 provided the Internal Revenue Service (IRS) with $80M of funding for technology and enforcement. The IRS has deployed some of that capital into technology initiatives to help aid in enforcement and streamline taxpayer submission processes. Over the last few years, the IRS has put mechanisms in place to improve data quality, quickly identify errors in submission, and enable the industry to perform reconciliations on their reportable data before e-filing submissions. While the IRS appears to be looking for ways to ensure better data quality and improve user experience and tax compliance, is the data being provided being used for analytics to inform and influence its enforcement agenda?
In this three-part blog series, we discuss initiatives implemented by the IRS and how organizations can leverage the S&P Global Market Intelligence (SPGMI) Tax Solutions to improve operational preparedness and risk management in their information reporting and withholding processes.
Blog 2: The Future of Tax Filing: Embracing Modernized e-Filing
In 2024, the IRS ushered in a new era of tax filing with the introduction of the Information Returns Intake System (IRIS) for certain Forms 1099 and the modernized e-filing (MeF) for the electronic Form 1042, Annual Withholding Tax Return for US Source Income of Foreign Persons. The S&P Global Market Intelligence Tax Solution and a team of tax experts were at the forefront and fully prepared to assist our clients in navigating this transformative change. Our tax reporting application seamlessly supports the new schemas, transmission, and submission processes. It is approved by the IRS as an authorized MeF filer with our name on the official IRS authorized provider list
Administrative Exemption for Forms 1042: However, Notice 2024-26, issued in late February, granted an administrative exemption to both US and Foreign withholding agents from the requirements to file Forms 1042 electronically for payments made in 2023. This exemption was partly driven by valuable taxpayer feedback and extensive testing of the new schemas, ensuring a smooth transition for all stakeholders.
The Advantages of Modernized e-Filing: Make no mistake; modernized e-filing is the future for the IRS and taxpayers, and for good reason. This paperless process offers many benefits, including near real-time processing of transmissions and prompt acknowledgment; straightforward explanations are provided, pinpointing errors; and integrated refund and payment options allow for direct deposits and electronic withdrawals. Moreover, electronic filing is available 24/7, providing convenience and accessibility to taxpayers. See IRS Publication 4163 for all the benefits. While this creates many efficiencies for taxpayers, it also allows the IRS to collect and analyze massive amounts of data in near real-time to refine their enforcement agenda and identify anomalies.
Conclusion: The introduction of modernized e-filing marks a significant milestone in the evolution of tax filing. SPGMI Tax Solutions is proud to be at the forefront of this transformation, providing our clients with the necessary tools and expertise to navigate the changing landscape. Embracing modernized e-filing offers numerous advantages, from a completely paperless process to enhanced efficiency and data analysis capabilities. As we move forward, businesses appear to be embracing the future of tax filing and unlocking the full potential of modernized e-filing.
You may also be interested in reading the first in this 3 part blog series:
Blog 1: Streamlined Compliance with Real-Time Taxpayer Identification Number (TIN) Matching
S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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