The IRS has been steadily lowering the e-filing threshold over the past several years, and 2026 marks another significant step. If you're still paper-filing any employment tax returns, it's time to make the switch.
The New Threshold: 10 or More Returns
Starting with returns filed after January 1, 2024, the IRS requires electronic filing for any filer submitting 10 or more information returns (W-2s, 1099s, etc.). The count is aggregated across information return types. Employment tax returns like the 941 and 940 have separate e-filing requirements that apply to nearly all filers regardless of count.
Previously the information return threshold was 250 returns. This change means virtually every accounting firm and payroll service must now e-file.
Which Forms Are Affected
The e-filing mandate covers two categories. Information returns — W-2/W-3, 1099-NEC/1096 — are subject to the 10-return aggregate threshold. Employment tax returns — Form 941, 940, 943, 944, 945 — have separate e-filing requirements and must generally be e-filed by authorized providers regardless of count.
The 10-return threshold is aggregated across information return types. So if you file 5 W-2s and 5 1099-NECs, you've hit 10 and must e-file all information returns.
Penalties for Non-Compliance
Failing to e-file when required can result in penalties of $60 to $310 per return, depending on how late the correction is made. For a firm handling hundreds of clients, these penalties add up quickly.
The IRS has indicated it will enforce these penalties more aggressively starting in 2026.
How MeF E-Filing Works
The IRS Modernized e-File (MeF) system is the authorized channel for electronically filing employment tax returns. It uses XML-based submissions transmitted via a secure SOAP web service.
Payrollix is a registered IRS e-file provider and transmits directly to MeF. When you approve a quarterly 941 filing, the system generates the XML, packages it per IRS specifications, transmits it, and tracks the acknowledgment — all automatically.
Getting Started with E-Filing
If you're transitioning from paper filing, the process is straightforward with Payrollix. Your payroll data is already in the system, so generating and filing returns is a one-click operation. No separate IRS e-Services registration is needed — Payrollix handles transmission under its own EFIN.
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