Furnishing payee statements electronically.

• Author: Zarzar, Robert

Last year, the IRS issued temporary and proposed regulations setting forth procedures under which filers of certain information returns can furnish payee statements electronically, rather than on paper. The regulations anticipate use of a Website-based technology for delivery. While the information returns that may be provided electronically under these regulations are limited to Form W-2,Wage and Tax Statement, Form 1098-E, Student Loan Interest Statement, and Form 1098-T, Tuition Payment Statement, the regulations likely will be extended to other information in the near future.

Under the regulations, information return recipients must consent affirmatively to receiving their statements in an electronic format. The consent must be made electronically, in a manner that reasonably demonstrates that the recipient will be able to access the statement in the electronic format in which it will be furnished. Alternatively, the consent may be made in a different manner if it is confirmed electronically. As a practical matter, therefore, an employer cannot obtain a "consent" from an employee to furnish Form W-2 electronically if the employee has no access to a computer or to the employer's intranet on which employee Forms W-2 are to be posted.

To obtain valid consents from recipients, the furnisher must provide them with a clear and conspicuous disclosure that the payee statement will be furnished on paper if they do not consent to receive it electronically. Recipients must also be informed of the scope and duration of the consent (e.g., whether the consent will continue to apply to future years unless it is withdrawn). Finally, the furnisher must inform recipients that they may withdraw consent at any time by furnishing the withdrawal in writing (either electronically or on paper) to the filer.

On or before January 31 of the year following the calendar year to which the statement relates, the furnisher must notify the recipient that the payee statement is posted on the applicable Website. This notice may be delivered by mail, e-mail or in person. The notice must provide instructions on how to access and print the statement, and include the words "IMPORTANT TAX RETURN DOCUMENT AVAILABLE" in capital letters. The good news for information return providers is that under the regulations they need not confirm that recipients actually have entered their Website and accessed information return data.

Given the annual cost of processing, printing and...