The Government Accountability Office has recommended that the required threshold for electronic filing of W-2’s be reduced to between 5 and 10 forms per year.
The current threshold is 250 forms. All businesses filing 250 W-2’s or more must file them electronically, unless granted a waiver by the IRS.
There are two main advantages to a reduced threshold. One, obviously, is that it would reduce the amount of paper produced and handled and by the IRS and SSA. Two, it would help the IRS get confirmation of income in a more timely manner and help reduce the amount of fraudulent tax refunds issued by the IRS. The number of fraudulent tax refunds issued by the IRS was estimated to be between 3.5 and 5 billion dollars in 2013.
Officials in both agencies see the reduction in the required threshold as the right thing to do. They note that while a much smaller reduction in the threshold, to say 50 forms, would help, a reduction to 5-10 would be much more significant and thus result in a significantly greater benefit. There are currently an estimated 4.5 million businesses with less then 10 employees.
In other efforts to help reduce fraudulent returns, The IRS and SSA is also considering moving up the deadline from March 31 as to when W-2’s must be filed to government agencies. While employee W-2’s must be sent out by Jan 31, employers have up to March 31 to submit the forms to the SSA. Many states are moving towards pushing up that deadline.
The Government is also considering requiring businesses to file W-2 income to the SSA on a quarterly basis, as opposed to an annual basis, as soon as 2016.
While the Advi$or understands the need to solve the issue of fraudulent refunds, we wonder why the IRS is not considering slowing down the refund process rather than speeding up the filing process. It seems to us that speeding up a process that is already very cumbersome and must be performed in an already limited time frame only opens the door to more errors. Slowing down the refund process would allow for more accuracy in that process and perhaps encourage employees to spend more time working on their W-4 to more accurately define their tax withholdings and minimize their refund.
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