[Federal Register Volume 70, Number 8 (Wednesday, January 12, 2005)]
[Rules and Regulations]
[Pages 2012-2016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-649]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[TD 9175]
RIN 1545-BE19
Returns Required on Magnetic Media
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains temporary regulations relating to the
requirements for filing corporate income tax returns and returns of
organizations required to file returns under section 6033 on magnetic
media pursuant to section 6011(e) of the Internal Revenue Code. The
term magnetic media includes any magnetic media permitted under
applicable regulations, revenue procedures, or publications, including
electronic filing. The text of the temporary regulations also serves as
the text of the proposed regulations set forth in the notice of
proposed rulemaking on this subject in the Proposed Rules section in
this issue of the Federal Register.
DATES: These regulations are effective January 12, 2005.
FOR FURTHER INFORMATION CONTACT: Michael E. Hara, (202) 622-4910 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Electronic filing of tax returns benefits taxpayers and the IRS by
eliminating the manual processing of returns and reducing errors that
are more likely to occur during the manual preparation and processing
of paper returns. Electronic filing results in faster settling of
accounts and better customer service because the time required to
process paper returns is eliminated. The error rate for corporate
income tax returns filed on Form 1120, ``U.S. Corporation Income Tax
Return'' and Form 1120S, U.S. Income Tax Return for an S Corporation,''
on paper is approximately 20 percent. Information returns required to
be filed under section 6033, which include Form 990, ``Return of
Organization Exempt From Income Tax,'' and Form 990-PF, ``Return of
Private Foundation or Section 4947(a)(1) Trust Treated as a Private
Foundation,'' that are filed on paper have an error rate of
approximately 35 percent. The error rate for paper returns is due in
roughly equal parts to IRS processing errors and taxpayer return
preparation mistakes. By contrast, electronically filed returns have an
error rate of less than one percent because these returns are subject
to screening by the IRS prior to being accepted and are not required to
be input manually by the IRS. Furthermore, returns required to be filed
pursuant to section 6033 must be made available to the public by both
the organization and the IRS pursuant to section 6104. Many state
charity regulatory agencies rely on these returns. Requiring these
returns to be filed electronically improves the accuracy of the
information for both public and regulatory oversight of these
organizations.
Electronic filing of returns improves taxpayer satisfaction and
confidence in the filing process, and may be more cost effective for
taxpayers who file electronically. Electronic filing will enable the
IRS to review taxpayer submissions expeditiously to reduce audit cycle
time and will help the IRS identify emerging trends.
In February 2004, the IRS introduced Modernized e-File, a new
electronic filing system for corporations required to file Form 1120 or
Form 1120S and organizations required to file Form 990. During the
development of Modernized e-File, the IRS worked closely with taxpayers
and tax professionals to ensure that the new electronic filing system
would satisfy their needs. Modernized e-File alleviates the burden of
filing massive paper returns, which may be up to 50,000 pages in
length. Electronically filed returns are processed upon receipt and,
shortly thereafter, an IRS acknowledgment message is generated to
inform taxpayers or tax professionals that the return has been accepted
or rejected. Error messages for rejected returns identify the reasons
the return was rejected and make it easier for the taxpayer or tax
professional to correct the errors. Modernized e-File streamlines
electronic filing by eliminating the need for paper documents to be
mailed to the IRS and enables taxpayers to attach forms and schedules,
along with other documents, to the return in Portable Document Format
(PDF).
Section 6011(e) authorizes the Secretary to prescribe regulations
providing the standards for determining which returns must be filed on
magnetic media or in other machine-readable form. Section 6011(e)(2)
provides that the Secretary may not require any person to file returns
on magnetic media unless the person is required to file at least 250
returns during the calendar year. Section 6011(e)(2)(B) requires that
the Secretary, prior to issuing regulations requiring these entities to
file returns on magnetic media, take into account (among other relevant
factors) the ability of the taxpayer to comply at reasonable cost with
the requirements of the regulations. The term magnetic media includes
any magnetic media permitted under applicable regulations, revenue
procedures, or publications, including electronic filing. Recognizing
the benefits of electronic filing, Congress enacted section 2001(a) of
the IRS Restructuring and Reform Act of 1998, Public Law 105-206, 112
Stat. 727, which states that the policy of Congress is to promote
paperless filing, with a long-range goal of providing for the filing of
at least 80 percent of all Federal and information returns in
electronic form by 2007.
The IRS has partnered with taxpayers and tax practitioners in the
design of Modernized e-File to minimize burdens
[[Page 2013]]
on taxpayers and tax practitioners and to address their concerns. Most
corporate returns are prepared with the assistance of tax return
preparation software. Some of these returns cannot yet be filed
electronically using Modernized e-File because additional software is
needed to format the return data and additional hardware may be needed
to transmit the return data to the IRS. As a result, some taxpayers may
incur incremental costs to make the transition from paper filing to
electronic filing using Modernized e-File. After carefully evaluating
the benefits of electronic filing and the burdens that might be imposed
on filers, the IRS has determined that taxpayers will be able to
convert to electronic filing at a reasonable cost and that the benefits
to both the IRS and taxpayers substantially outweigh the costs.
These regulations amend the Regulations on Procedure and
Administration (26 CFR part 301) relating to the filing on magnetic
media pursuant to section 6011(e) of corporate income tax returns, S
corporation returns, and returns required under section 6033. These
regulations provide that certain large corporations, including S
corporations, are required to file their corporate income tax returns
electronically. These regulations also provide that certain large
exempt organizations, nonexempt charitable trusts, and exempt and
nonexempt private foundations are required to file electronically
returns required to be filed under section 6033.
The IRS currently does not have the capability to accept electronic
filing of certain types of Form 1120, Form 1120S, Form 990, and Form
990-PF, such as a Form 1120 for a taxpayer that has changed its
accounting period or a Form 1120 that is the taxpayer's final return.
These types of returns are excluded from the electronic filing
requirement under these regulations. The IRS will announce those
returns that are excluded from electronic filing under these
regulations in its publications, forms and instructions. The Treasury
Department and the IRS intend to require electronic filing of
additional corporate income tax returns, excise tax returns and returns
required to be filed under section 6033 as the IRS increases its
capability to receive these forms electronically, provided that the
Treasury Department and the IRS determine that taxpayers are able to
comply with the electronic filing requirements at a reasonable cost.
Explanation of Provisions
To expand electronic filing, these regulations provide that the
following taxpayers that are required by the Code or regulations to
file at least 250 returns during the calendar year ending with or
within the taxpayer's taxable year are required to file the following
tax returns electronically for the taxable years indicated:
------------------------------------------------------------------------
Applicability
Entities Form(s) dates
------------------------------------------------------------------------
Corporations, including electing Form 1120, ``U.S. Taxable years
small business corporations, Corporation ending on or
with assets of $50 million or Income Tax after December
more. Return'' or Form 31, 2005.
1120S, ``U.S.
Income Tax Return
for an S
Corporation''.
Corporations, including electing Form 1120, ``U.S. Taxable years
small business corporations, Corporation ending on or
with assets of $10 million or Income Tax after December
more. Return'' or Form 31, 2006.
1120S, ``U.S.
Income Tax Return
for an S
Corporation''.
Exempt organizations with assets Form 990, ``Return Taxable years
of $100 million or more that of Organization ending on or
are required to file returns Exempt From after December
under section 6033. Income Tax''. 31, 2005.
Exempt organizations with assets Form 990, ``Return Taxable years
of $10 million or more that are of Organization ending on or
required to file returns under Exempt From after December
section 6033. Income Tax''. 31, 2006.
Private foundations or section Form 990-PF, Taxable years
4947(a)(1) trusts that are ``Return of ending on or
required to file returns under Private after December
section 6033. Foundation or 31, 2006.
Section
4947(a)(1) Trust
Treated as a
Private
Foundation''.
------------------------------------------------------------------------
Under these regulations, an entity's assets are determined based on
total assets at the end of the taxable year as reported on the entity's
Form 1120, 1120S, or 990.
Some of these large entities already file their returns
electronically. In addition, many of these large entities prepare their
income tax returns electronically, but file the returns on paper. The
Treasury Department and the IRS have determined that these taxpayers
are able to comply at a reasonable cost with the requirement to file
returns electronically. To eliminate the potential burden of electronic
filing on small businesses that may not be able to comply at a
reasonable cost, these regulations exclude small corporations and
certain exempt organizations with total assets of less than $10
million.
The determination of whether an entity is required to file at least
250 returns is made by aggregating all returns, regardless of type,
that the entity is required to file over the calendar year, including,
for example, income tax returns, returns required under section 6033,
information returns, excise tax returns, and employment tax returns.
Under these regulations, corrected or amended returns are not counted
in determining whether the 250-return threshold is met. All members of
a controlled group of corporations are required to file their Forms
1120 electronically if the total number of returns required to be filed
by the controlled group of corporations is at least 250.
The aggregation of returns required under these regulations is
limited to determining whether an entity is required to file Form 1120,
Form 1120S, Form 990, or Form 990-PF electronically. These regulations
do not affect Sec. 301.6011-2(c)(1)(iii), which provides that returns
are not to be aggregated for purposes of determining whether
information returns must be filed on magnetic media. These regulations
also do not affect Sec. 301.6721-1(a)(2)(ii), which provides that the
250-return threshold requirements apply separately to original and
corrected returns.
Corporations required to file Form 1120 or Form 1120S
electronically under these regulations may file amended returns on
paper in the form allowed by Rev. Proc. 94-69 (1994-2 C.B. 804), or in
the manner prescribed by any subsequent revenue procedure. However, an
entity that files an incomplete electronic return and subsequently
files an amended paper return before the return's due date has not
complied with the provisions of these regulations because a second
return filed before the due date is treated as an original return.
[[Page 2014]]
Hardship Waiver
These regulations provide that the Commissioner may waive the
requirements to file electronically in cases of undue hardship. Because
the Treasury Department and the IRS believe that electronic filing will
not impose significant burdens on the taxpayers covered by these
regulations, the Commissioner will grant waivers of the electronic
filing requirement only in exceptional cases. The Treasury Department
and the IRS invite comments from the public regarding the waiver
provision in these regulations. Additionally, the IRS will meet with
various groups, including software developers and tax practitioners, to
assist taxpayers in preparing to file their returns electronically.
After considering comments, the Treasury Department and the IRS will
issue guidance that will set forth the procedures by which a taxpayer
may request a hardship waiver.
Exclusions
These regulations provide exclusions from the requirement to file
electronically for certain corporations and organizations that have not
had a longstanding filing obligation. Corporations and organizations
are not required to file their returns electronically if they were not
required to file a Form 1120, Form 1120S, Form 990, or Form 990-PF for
the preceding taxable year or have not been in existence for at least
one calendar year prior to the due date (not including extensions) of
their Form 1120, Form 1120S, Form 990, or Form 990-PF.
Date of Filing
A return filed electronically is deemed to be filed on the date of
the electronic postmark. See Sec. 301.7502-1(d). If a corporation or
organization that is required to file electronically fails to do so,
the corporation or organization is deemed to have failed to file its
return.
Effective Dates
To permit taxpayers sufficient time to implement the requirements
of these regulations, these regulations apply to corporations required
to file corporate income tax returns with total assets of $50 million
or more as shown on their Schedule L of the Form 1120 or 1120S for
taxable years ending on or after December 31, 2005, and to corporations
required to file corporate income tax returns with total assets of $10
million or more as shown on their Schedule L of their Form 1120 or
1120S for taxable years ending on or after December 31, 2006. These
regulations apply to any organization that is required to file Form 990
and that, for a taxable year ending on or after December 31, 2005, has
total assets as of the end of the taxable year of $100 million or more
or that, for a taxable year ending on or after December 31, 2006, has
total assets as of the end of the taxable year of $10 million or more.
These regulations will apply to any organization required to file Form
990-PF for taxable years ending on or after December 31, 2006. All
other corporations and organizations are encouraged to adopt electronic
filing as soon as feasible.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. For
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6)
refer to the Special Analyses of the preamble to the cross-reference of
proposed rulemaking published in the Proposed Rules section in this
issue of the Federal Register. Pursuant to section 7805(f) of the Code,
these regulations will be submitted to the Chief Counsel for Advocacy
of the Small Business Administration for comment on their impact on
small business.
Drafting Information
The principal author of these temporary regulations is Michael E.
Hara, Office of the Associate Chief Counsel (Procedure and
Administration), although other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Amendments to the Regulations
0
Accordingly, 26 CFR parts 1 and 301 are amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.6011-5T is added to read as follows:
Sec. 1.6011-5T Required use of magnetic media for corporate income
tax returns (temporary).
The return of a corporation that is required to be filed on
magnetic media under Sec. 301.6011-5T of this chapter must be filed in
accordance with Internal Revenue Service revenue procedures,
publications, forms, or instructions. (See Sec. 601.601(d)(2) of this
chapter).
0
Par. 3. Section 1.6033-4T is added to read as follows:
Sec. 1.6033-4T Required use of magnetic media for returns by
organizations required to file returns under section 6033 (temporary).
The return of an organization that is required to be filed on
magnetic media under Sec. 301.6033-4T of this chapter must be filed in
accordance with Internal Revenue Service revenue procedures,
publications, forms, or instructions. (See Sec. 601.601(d)(2) of this
chapter).
0
Par. 4. Section 1.6037-2T is added to read as follows:
Sec. 1.6037-2T Required use of magnetic media for income tax returns
of electing small business corporations (temporary).
The return of an electing small business corporation that is
required to be filed on magnetic media under Sec. 301.6037-2T of this
chapter must be filed in accordance with Internal Revenue Service
revenue procedures, publications, forms, or instructions. (See Sec.
601.601(d)(2) of this chapter).
PART 301--PROCEDURE AND ADMINISTRATION
0
Par. 5. The authority citation for part 301 is amended by adding
entries, in numerical order, to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6011-5T also issued under 26 U.S.C. 6011. * * *
Section 301.6033-4T also issued under 26 U.S.C. 6033. * * *
Section 301.6037-2T also issued under 26 U.S.C. 6037. * * *
0
Par. 6. Section 301.6011-5T is added to read as follows:
Sec. 301.6011-5T Required use of magnetic media for corporate income
tax returns (temporary).
(a) Corporate income tax returns required on magnetic media--(1) A
corporation required to file a corporate income tax return on Form
1120, ``U.S. Corporation Income Tax Return,'' under Sec. 1.6012-2 of
this chapter must file its corporate income tax return on magnetic
[[Page 2015]]
media if the corporation is required by the Internal Revenue Code or
regulations to file at least 250 returns during the calendar year
ending with or within its taxable year, was required to file a
corporate income tax return on Form 1120 under Sec. 1.6012-2 of this
chapter for the preceding taxable year, and has been in existence for
at least one year prior to the due date (excluding extensions) of its
corporate income tax return. Returns filed on magnetic media must be
made in accordance with applicable revenue procedures, publications,
forms, or instructions. In prescribing revenue procedures,
publications, forms, or instructions, the Commissioner may direct the
type of magnetic media filing. (See Sec. 601.601(d)(2) of this
chapter).
(2) All members of a controlled group of corporations must file
their corporate income tax returns on magnetic media if the aggregate
number of returns required to be filed by the controlled group of
corporations is at least 250.
(b) Waiver. The Commissioner may grant waivers of the requirements
of this section in cases of undue hardship. A request for waiver must
be made in accordance with applicable revenue procedures or
publications. The waiver also will be subject to the terms and
conditions regarding the method of filing as may be prescribed by the
Commissioner.
(c) Failure to file. If a corporation fails to file a corporate
income tax return on magnetic media when required to do so by this
section, the corporation is deemed to have failed to file the return.
(See section 6651 for the addition to tax for failure to file a
return). In determining whether there is reasonable cause for failure
to file the return, Sec. 301.6651-1(c) and rules similar to the rules
in Sec. 301.6724-1(c)(3) (undue economic hardship related to filing
information returns on magnetic media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media. The term magnetic media means any magnetic
media permitted under applicable regulations, revenue procedures, or
publications. These generally include magnetic tape, tape cartridge,
and diskette, as well as other media, such as electronic filing,
specifically permitted under the applicable regulations, procedures,
publications, forms, or instructions. (See Sec. 601.601(d)(2) of this
chapter).
(2) Corporation. The term corporation means a corporation as
defined in section 7701(a)(3).
(3) Controlled group of corporations. The term controlled group of
corporations means a group of corporations as defined in section
1563(a).
(4) Corporate income tax return. The term corporate income tax
return means a Form 1120, ``U.S. Corporation Income Tax Return,'' along
with all other related forms and schedules that are required to be
attached to the Form 1120.
(5) Determination of 250 returns. For purposes of this section, a
corporation or controlled group of corporations is required to file at
least 250 returns if, during the calendar year ending with or within
the taxable year of the corporation or the controlled group, the
corporation or the controlled group is required to file at least 250
returns of any type, including information returns. If the corporation
is a member of a controlled group, the determination of the number of
returns includes all returns required to be filed by all members of the
controlled group during that calendar year.
(e) Example. The following example illustrates the provisions of
paragraph (d)(5) of this section:
Example. The taxable year of Corporation X, a fiscal year
taxpayer with assets in excess of $10 million, ends on September 30.
During the calendar year ending December 31, 2007, X was required to
file one Form 1120, ``U.S. Corporation Income Tax Return,'' 100
Forms W-2, ``Wage and Tax Statement,'' 146 Forms 1099-DIV,
``Dividends and Distributions,'' one Form 940, ``Employer's Annual
Federal Unemployment (FUTA) Tax Return,'' and four Forms 941,
``Employer's Quarterly Federal Tax Return.'' Because X is required
to file 252 returns during the calendar year that ended within its
taxable year ending September 30, 2008, X is required to file its
Form 1120 electronically for its taxable year ending September 30,
2008.
(f) Effective dates. This section applies to corporate income tax
returns for corporations that report total assets at the end of the
corporation's taxable year that equal or exceed $50 million on Schedule
L of their Form 1120, for taxable years ending on or after December 31,
2005. This section applies to corporate income tax returns for
corporations that report total assets at the end of the corporation's
taxable year that equal or exceed $10 million on Schedule L of their
Form 1120, for taxable years ending on or after December 31, 2006.
0
Par. 7. Section 301.6033-4T is added to read as follows:
Sec. 301.6033-4T Required use of magnetic media for returns by
organizations required to file returns under section 6033 (temporary).
(a) Returns by organizations required to file returns under section
6033 on magnetic media. An organization required to file a return under
section 6033 on Form 990, ``Return of Organization Exempt from Income
Tax,'' or Form 990-PF, ``Return of Private Foundation or Section
4947(a)(1) Trust Treated as a Private Foundation,'' must file its Form
990 or 990-PF on magnetic media if the organization is required by the
Internal Revenue Code or regulations to file at least 250 returns
during the calendar year ending with or within its taxable year, was
required to file its Form 990 or Form 990-PF under section 6033 for the
preceding taxable year, and has been in existence for at least one
calendar year prior to the due date (excluding extensions) of its Form
990 or Form 990-PF. Returns filed on magnetic media must be made in
accordance with applicable revenue procedures, publications, forms, or
instructions. In prescribing revenue procedures, publications, forms,
or instructions, the Commissioner may direct the type of magnetic media
filing. (See Sec. 601.601(d)(2) of this chapter).
(b) Waiver. The Commissioner may grant waivers of the requirements
of this section in cases of undue hardship. A request for waiver must
be made in accordance with applicable revenue procedures or
publications. The waiver also will be subject to the terms and
conditions regarding the method of filing as may be prescribed by the
Commissioner.
(c) Failure to file. If an organization required to file a return
under section 6033 fails to file an information return on magnetic
media when required to do so by this section, the organization is
deemed to have failed to file the return. (See section 6652 for the
addition to tax for failure to file a return.) In determining whether
there is reasonable cause for failure to file the return, Sec.
301.6652-2(f) and rules similar to the rules in Sec. 301.6724-1(c)(3)
(undue economic hardship related to filing information returns on
magnetic media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media. The term magnetic media means any magnetic
media permitted under applicable regulations, revenue procedures, or
publications. These generally include magnetic tape, tape cartridge,
and diskette, as well as other media, such as electronic filing,
specifically permitted
[[Page 2016]]
under the applicable regulations, procedures, publications, forms or
instructions. (See Sec. 601.601(d)(2) of this chapter).
(2) Return required under section 6033. The term return required
under section 6033 means a Form 990, ``Return of Organization Exempt
from Income Tax,'' and Form 990-PF, ``Return of Private Foundation or
Section 4947(a)(1) Trust Treated as a Private Foundation,'' along with
all other related forms and schedules that are required to be attached
to the Form 990 or Form 990-PF.
(3) Determination of 250 returns. For purposes of this section, an
organization is required to file at least 250 returns if, during the
calendar year ending with or within the taxable year of the
organization, the organization is required to file at least 250 returns
of any type, including information returns.
(e) Example. The following example illustrates the provisions of
paragraph (d)(3) of this section. In the example, the organization is a
calendar year taxpayer:
Example. In 2006, Organization T, with total assets in excess of
$10 million, is required to file one Form 990, ``Return of
Organization Exempt from Income Tax,'' 200 Forms W-2, ``Wage and Tax
Statement,'' and 60 Forms 1099-MISC, ``Miscellaneous Income.''
Because T is required to file 261 returns during the calendar year,
T must file its 2006 Form 990 electronically.
(f) Effective dates. This section applies to any organization
required to file Form 990 for a taxable year ending on or after
December 31, 2005, that has total assets as of the end of the taxable
year of $100 million or more. This section applies to any organization
required to file Form 990 for a taxable year ending on or after
December 31, 2006 that has total assets as of the end of the taxable
year of $10 million or more. This section applies to any organization
required to file Form 990-PF for taxable years ending on or after
December 31, 2006.
0
Par. 8. Section 301.6037-2T is added to read as follows:
Sec. 301.6037-2T Required use of magnetic media for returns of
electing small business corporation (temporary).
(a) Returns of electing small business corporation required on
magnetic media--An electing small business corporation required to file
an electing small business return on Form 1120S, ``U.S. Income Tax
Return for an S Corporation,'' under Sec. 1.6037-1 of this chapter
must file its Form 1120S on magnetic media if the small business
corporation is required by the Internal Revenue Code and regulations to
file at least 250 returns during the calendar year ending with or
within its taxable year, was required to file its Form 1120S under
Sec. 6037-1 of this chapter for the preceding taxable year, and has
been in existence for at least one calendar year prior to the due date
(excluding extensions) of its Form 1120S. Returns filed on magnetic
media must be made in accordance with applicable revenue procedures,
publications, forms, or instructions. In prescribing revenue
procedures, publications, forms, or instructions, the Commissioner may
direct the type of magnetic media filing. (See Sec. 601.601(d)(2) of
this chapter).
(b) Waiver. The Commissioner may grant waivers of the requirements
of this section in cases of undue hardship. A request for waiver must
be made in accordance with applicable revenue procedures or
publications. The waiver also will be subject to the terms and
conditions regarding the method of filing as may be prescribed by the
Commissioner.
(c) Failure to file. If an electing small business corporation
fails to file a return on magnetic media when required to do so by this
section, the corporation is deemed to have failed to file the return.
(See section 6651 for the addition to tax for failure to file a
return.) In determining whether there is reasonable cause for failure
to file the return, Sec. 301.6651-1(c) and rules similar to the rules
in Sec. 301.6724-1(c)(3) (undue economic hardship related to filing
information returns on magnetic media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media. The term magnetic media means any magnetic
media permitted under applicable regulations, revenue procedures, or
publications. These generally include magnetic tape, tape cartridge,
and diskette, as well as other media, such as electronic filing,
specifically permitted under the applicable regulations, procedures,
publications, forms, or instructions. (See Sec. 601.601(d)(2) of this
chapter).
(2) Corporation. The term corporation means a corporation as
defined in section 7701(a)(3).
(3) Electing small business corporation return. The term electing
small business corporation return means a Form 1120S, ``U.S. Income Tax
Return for an S Corporation,'' along with all other related forms and
schedules that are required to be attached to the Form 1120S.
(4) Electing small business corporation. The term electing small
business corporation means an S corporation as defined in section
1361(a)(1).
(5) Determination of 250 returns. For purposes of this section, a
corporation is required to file at least 250 returns if, during the
calendar year ending with or within the taxable year of the
corporation, the corporation is required to file at least 250 returns
of any type, including information returns.
(e) Example. The following example illustrates the provisions of
paragraph (d)(5) of this section. In the example, the corporation is a
calendar year taxpayer:
Example. In 2007, Corporation S, an electing small business
corporation with assets in excess of $10 million, is required to
file one Form 1120S, ``U.S. Corporation Income Tax Return,'' 100
Forms W-2, ``Wage and Tax Statement,'' 146 Forms 1099-DIV,
``Dividends and Distributions,'' one Form 940, ``Employer's Annual
Federal Unemployment (FUTA) Tax Return,'' four Forms 941,
``Employer's Quarterly Federal Tax Return.'' Because S is required
to file 252 returns during the calendar year, S is required to file
its 2007 Form 1120S electronically.
(f) Effective dates. This section applies to returns of electing
small business corporations that report total assets at the end of the
corporation's taxable year that equal or exceed $50 million on Schedule
L of Form 1120S for taxable years ending on or after December 31, 2005.
This section applies to returns of electing small business corporations
that report total assets at the end of the corporation's taxable year
that equal or exceed $10 million on Schedule L of Form 1120S for
taxable years ending on or after December 31, 2006.
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
Approved: January 6, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury.
[FR Doc. 05-649 Filed 1-11-05; 8:45 am]
BILLING CODE 4830-01-P