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ComplianceTax & AccountingMarch 10, 2023

IRA, HSA, and CESA reporting: Electronic filing mandate will be all inclusive

Updated April 26, 2024

The law generally requires custodians and trustees of individual retirement accounts (IRAs), Health Savings Accounts (HSAs), and Coverdell Education Savings Accounts (CESAs) to file Forms 1099 series and 5498 series electronically. Low volume filers had not been subject to the electronic filing requirement allowing them to file returns to the IRS on paper, which was the case for 2022 reports filed in 2023. With the publishing of final regulations [i.e., Treasury Decision (TD) 9972] that were authorized by the Taxpayer First Act in 2019, most organizations, including low volume filers, will be required to file returns electronically beginning in 2024. Although these regulations are far reaching, we have limited this article to addressing the most common reporting for IRAs, HSAs, and CESAs which includes Forms 1099 and 5498 series.

Specifically, under the new law, effective beginning with 2023 tax year reporting completed in 2024, financial organizations are required to file electronically if any combination of required filings is 10 or more in aggregate. So, if an organization is required to file two Form 1099-Rs, two Form 1099-SAs, five Form 5498s, and five Form 5498-SAs for 2023 in 2024, it will be subject to the new electronic filing mandate. Most other forms, including Forms W-2, 1042-S, 1099-INT, and 1099-DIV are included in determining whether the filer has 10 or more forms in aggregate. For contrast, the 2022 tax year filings completed in 2023, IRA, HSA, and CESA custodians and trustees were required to file each type of Form 1099 or 5498 electronically only if the total number of a specific form is 250 or more. For example, if an IRA custodian must file 250 or more Form 5498s or 250 or more Form 1099-Rs it would be required to file them with the IRS electronically.

Additionally, organizations required to file forms electronically in 2024 must file corrections of such forms electronically. As most organizations already file their original Forms 1099 and 5498 series with the IRS electronically, compliance with the new requirements will center on corrections of such forms. With the electronic reporting correction requirement, organizations that have filed corrections to any Forms 1099 or 5498 series on paper in the past must now be prepared to file corrections electronically, including corrections for 2023 and later years’ forms when reporting in 2024 and later years. 

Organizations should note there is a process by which IRS may grant an exception from the electronic filing mandate. By filing Form 8508, Application for a Waiver from Electronic Filing of Information Returns, the IRS will continue to grant hardship waivers and grant reasonable-cause relief from penalties for failure to file returns electronically in appropriate cases. 

For an opportunity to learn more about IRAs and other tax-advantaged accounts, including Health Savings Accounts and Coverdell Education Savings Accounts, consider the Wolters Kluwer IRA Library or on-demand video training offered on a variety of topics. Go here to learn more about training opportunities available to you or call us at 1-800-552-9408.

Senior Specialized Consultant, Tax Advantaged Accounts
With more than 40 years of experience, Steve has worked closely with hundreds of financial organizations to help them create, implement, and maintain their tax-advantaged accounts program. Steve also has an extensive background in working with employer qualified plans.
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