IRS to require big businesses, charities to e-file

IRS to require big businesses, charities to e-file

The IRS will require that the country’s largest companies and tax-exempt organizations electronically file their annual returns beginning next year.

The tax regulations announced today require that any business with assets of $50 million or more submit forms 1120 and 1120S, corporate returns, electronically, beginning with returns for tax year 2005. Any tax-exempt organization with assets of $100 million or more must file its Form 990, an annual information return, electronically.

In 2007, the IRS will lower the threshold to $10 million in assets for company returns and tax-exempt organizations. It will also require that all private foundations and charitable trusts use e-file to submit their annual information returns using the Form 990-PF.

There is one caveat: The e-filing mandate applies only to entities that file at least 250 returns—including income tax, excise tax, information and employment tax returns—during a calendar year.

This effort will mean that by 2007, more than 20,000 large corporate taxpayers and some 10,000 tax-exempt entities will file electronically, the tax agency estimated.

“Electronic filing will help speed tax processing and reduce audit cycle time,” IRS commissioner Mark Everson said. Audits typically take five years to complete for large corporations.

“Speeding processing also will help identify emerging trends and abuses earlier, enabling the IRS to address problems before they get out of hand,” he said.

Although the IRS does not require that small businesses file electronically, it encourages all taxpayers to do so. The agency introduced a new filing system, Modernized e-File, for corporate tax forms last year. Modernized e-File alleviates the burden of filing massive paper returns, which can be up to 50,000 pages each.

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