Episode 19: You Can Now Request a Form 1042 E-File Waiver — Should You?

A followup to last week's episode, as the IRS did end up releasing an efile waiver procedure for Form 1042. But just because the procedure exists doesn't mean you should use it. To request a waiver, you'll need to demonstrate hardship, document the steps you've already taken to comply, provide a cost computation, outline your plan to e-file in the future, and have an authorized officer sign under penalty of perjury. Requests go to the IRS by fax or mail, and here's the catch: the IRS won't send confirmation letters for 2025 waivers, so if your request is denied, you may not hear about it. The stronger move? If you filed an extension before the March 17 deadline, use that six-month runway to get an e-filing solution in place. 

Transcript

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The IRS has released a procedure to get out of electronically filing Form ten forty two this year. It's the exact same thing we talked about last week, except last week there wasn't a procedure. Now there is, but should you use it? I think the answer is still no. Welcome to Information Return Intelligence, the fast moving weekly podcast where we talk about all things related to information returns. This podcast is brought to you by the Institute of Finance and Management, IOFM.com. Last week we talked about Form 1042 and how some organizations may struggle with electronically filing Form 1042 this year. So Form 1042 is subject to the e-file mandate, which basically means if you have to e-file your 1099s and 1042s, you have to e-file Form 1042. And as we've covered, and we're not going to get into again today, Form 1042, the IRS uses a different intake system for it when you file electronically. So that could be a problem for some organizations that are filing Form 1042, especially if you're doing it in-house. Last week we talked about how there was no procedure to get out of electronic filing. And so I recommended that you file an extension, which, as this episode is airing, it's March 17th, which means the deadline has passed. So hopefully you file an extension. If you file an extension, that kicks the CAN all the way out to September and buys you six whole months to figure out how to e-file. Now let's talk about this procedure that the IRS released for requesting a waiver of electronic filing. The first thing I would say is if you listened to last week's episode, we talked about how there's a procedure for partnerships to get out of electronic filing of partnership returns. This is the exact same procedure. So there's a few notes before we talk about what the waiver must contain. First of all, you have to show the IRS that electronic filing of the 1042 will result in a hardship for you. And then you have to submit your request within 45 days of your extended due date. So in other words, that would put us at like August 1st or thereabouts of where you would need to submit this waiver request at this point, assuming that you have filed for an extension, so September 15th is your due date. Before we go further, just a quick word from our sponsor, IOFM, the Institute of Finance and Management. And you know, if you are listening to or watching this show, IOFM is right up your alley. IOFM is the leading resource for accounts payable and accounts receivable professionals, finance professionals in general. They have over 40 years in the industry. More than 25,000 people have been certified in their programs, their certification programs, which are recognized at Fortune 500 companies and respected across the industry as the gold standard for financial operations. I teach their information reporting certification program. More than just certifications and credentials, IOFM membership also gives you access to benchmarking reports to see how you stack up against your peers, white papers, compliance webinars. I teach some of those. Tools and templates, plus ask the experts, where you can get real answers to specific challenges you're dealing with. Plus, they host conferences twice a year. This year it's in Orlando in the spring and Austin, Texas this fall. I'll be at both, so you can stop by and say hi. Find out more at IOFM.com. And now back to the show. I strongly recommend that you don't request a waiver, but if you want to, here's what you do. This is all from the IRS, and you can find this on the IRS website. First of all, you put a notation at the top of the page, and the IRS guidance literally says put this in large letters, form 1042 e-file waiver request, and then put your organization's name, taxpayer ID number, and mailing address, the tax year for which a waiver is being requested, so 2025. And then here's the thing where it's not an automatic extension. You have to give a detailed explanation, the IRS says, of the steps that you've taken to meet the EFA requirement and why your steps were unsuccessful. You also have to show the hardship that e-filing would result in and show them things like your math on telling them that the cost would be too high. You have to show a computation of the costs involved, and then the steps that you plan to take in the future to ensure that you can e-file your Form 1042. And then an officer authorized to sign tax returns must sign this e-file waiver request with proper penalty of perjury language. And then you submit it to the IRS. The best way the IRS says is to fax it to them. They also have an address in Ogden, Utah that you can mail it to them. So that's the procedure. If you are having trouble e-filing Form 1042 and you want to submit for a waiver of your e-file requirements this year, the IRS says it will not send confirmation letters for 2025 waivers. The thing that I don't understand on that is what if you fail to convince the IRS of a reasonable hardship? How are they going to let you know? I don't know. The IRS doesn't say. I still say that at this point, again, hopefully you have filed for an extension. And use that extra six months of an extension to figure out an e filing solution for your organization. And that's it for this time around on Information Return Intelligence, brought to you by IOFM. Thanks so much for joining us, and we'll talk to you again next week. Dinoson Media Ventures.