Applying for a W2 e-filing waiver

We started our W-2 series feature earlier this year, giving us more time to explore W-2 issues, which, based on questions we’ve been encountering, are beginning to trip up employers.

Today’s edition is focused on applying for a waiver from filing electronically.

Who must file electronically?

Almost everyone.

Final regulations issued earlier this year require you to e-file all your information returns if you’re filing a combination of any 10 information returns. So something as simple as filing five W-2s, one 1099-MISC and six 1099-NECs vaults you into mandatory e-filing.

Payroll Handbook D

This new mandate will hit small employers especially hard, since they never had to e-file before.

The Social Security Administration’s no-programming e-filing option—W-2 Online—allows you to key information into a PDF of the W-2. You can print these forms and furnish them to employees. But there are hitches:

  • W-2 Online is limited to 50 W-2s at one time, but you can keep going back as many times as you need to. Downside: Keying in information on more than a handful of forms, let alone 50 forms, is a recipe for mistakes.
  • To access W-2 Online or any of the SSA’s free apps, you need to set up an account through its Business Services Online portal, and the process for doing so has changed substantially. Which means you need to start this process now.
  • If you’ve accessed BSO, maybe to use the SSA’s Social Security Number Verification Service but not to e-file, the SSA warns that you can no longer use your BSO user ID and password. You need to follow the link in the preceding bullet to obtain a new BSO credential.

What about those e-filing waivers?

You file Form 8508 with the IRS to request a waiver from e-filing the current year’s information returns (including 1099s). The form has been newly updated to reflect the changes to the e-filing rules. You must file this form 45 days before your W-2s are due to the SSA—Monday, Dec. 18. The IRS will begin processing forms on Jan. 1.

  • Since a waiver is for the current year’s filings only, be sure to enter 2023 on Line 1a.
  • First-time e-filers need not justify their reasons for seeking a waiver. They only need to complete Line 8 and sign the form.

You could always request a waiver if e-filing presented an undue hardship. The IRS reads this as very expensive, and this hasn’t changed.

There are a couple of new reasons for seeking a waiver.

  • If using the technology required to e-file conflicts with your religious beliefs, you’re automatically exempt. The IRS recommends that you complete Line 6 on Form 8508, although you’re not required to. If you don’t file the form, you need to notify the IRS of your qualification for a religious exemption. You only need to file the form once.
  • As a subset of undue hardship, rural filers may apply for a waiver if they don’t have access to the internet or they lack digital literacy skills. Nevertheless, while the IRS says rural filers are expected to make a good-faith effort to comply, it doesn’t define what counts as a good-faith effort, so availing yourself of the services of an accountant would probably count. Or make that two accountants. Since this falls under the undue hardship waiver provisions, you will need to present the IRS with two cost estimates comparing the cost of e-filing with the cost of filing on paper.