HR6458-119

What This Bill Does

The bill pushes employment-tax administration away from paper. It states that businesses and third-party representatives should be able to file employment tax forms, schedules, and amended returns electronically, and that IRS must make electronic employment-tax filing easier. Within one year, IRS must provide employers a fully automated electronic process for subtitle C filing and payment requirements, including amended returns, with first focus on Form 941-X. The bill creates a new section 3135 electronic filing credit: employers required to file quarterly employment-tax returns can receive a 1000 dollar credit for the first quarter in which filing and payment are all electronic and another 1000 dollar credit for one quarter the following year. The credit is capped by applicable employment taxes, can carry forward, is recaptured if the employer later stops electronic filing, and is unavailable to most governmental entities. The bill also creates a 250 dollar user fee for paper quarterly or annual employment-tax returns under chapters 21 or 23A, with exceptions for first and second paper submissions, employers without broadband or convenient online services, emergencies, identity-theft or cybercrime victims, other IRS-approved circumstances, and 99 percent electronic bulk filers. The paper fee starts for periods ending more than two years after enactment.

Who Benefits and How

Employers that move employment-tax returns and payments online benefit from a 1000 dollar credit in the first electronic quarter and a second 1000 dollar credit in a later-year elected quarter. Payroll service providers and third-party representatives benefit if IRS builds a fully automated front-end and back-end process, especially for Form 941-X. Employers in rural or emergency circumstances, identity-theft victims, and 99 percent electronic bulk filers benefit from fee exceptions or recapture protection.

Who Bears the Burden and How

IRS must build and maintain the automated filing process, make Form 941-X a first focus, administer the new credit, track carryforwards and recapture, administer exceptions, issue written notifications for waived first and second paper submissions, and collect the 250 dollar paper-filing fee. Employers that keep filing on paper must pay the fee unless an exception applies. Federal revenues must absorb the cost of the employment-tax credits.

Key Provisions

• Directs IRS within one year to make employment-tax filing and payment fully automated and electronic, including amended returns and first focus on Form 941-X.
• Creates a 1000 dollar electronic filing credit for the first fully electronic quarter and another 1000 dollar credit for one quarter in the following year.
• Limits, carries forward, and recaptures the credit if later returns and payments are not electronic, while providing hardship and bulk-filer protections.
• Bars most governmental entities from claiming the credit, with an exception for certain section 501(c)(1) organizations.
• Imposes a 250 dollar user fee on paper employment-tax returns after a two-year lead time, with exceptions for first or second submissions, lack of broadband, emergencies, identity theft, IRS-approved circumstances, and 99 percent electronic bulk filers.