Electronic Filing Improvement and Logistical Efficiency Act of 2025

(1) businesses and their third-party representatives should be able to file all employment tax forms and schedules, including amended returns, electronically;

(2) the current prevalence and reliance on paper by both the Internal Revenue Service and private sector businesses for quarterly and annual employment tax return filings is not sustainable and must be addressed immediately;

(3) the obstacles to electronic filing are both structural and behavioral; and

(4) the Internal Revenue Service must streamline the process for filing employment returns electronically, making it as easy and efficient as possible, while the internal revenue laws must incentivize the use of electronic filing to help rapidly overcome longstanding taxpayer behaviors.

(1) make available to employers fully-automated electronic process for satisfying all filing and payment requirements (including amended returns) for taxes imposed under subtitle C of the Internal Revenue Code,

(2) first focus on making available pursuant to paragraph (1) the adjusted employer’s quarterly Federal tax return or claim for refund (Form 941–X), and

(3) make all necessary technical and business changes to the electronic filing process to ensure that the process is fully automated on the front- and back-end and that electronic filing is the most convenient and efficient means of meeting such filing and payment requirements.

Subchapter D of chapter 21 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

In the case of any employer required to make a quarterly return of the taxes imposed by subtitle C, there shall be allowed as a credit against applicable employment taxes with respect to such employer an amount equal to—

(1) $1,000 for the calendar quarter for which the return and payment of such taxes are for the first time all made electronically, and

(2) in the year following the year in which a credit is first determined for a calendar quarter under paragraph (1), $1,000 for 1 such calendar quarter elected by the employer in such year for which the return and payment of such taxes are all made electronically.

The credit allowed by subsection (a) with respect to any calendar quarter shall not exceed the applicable employment taxes for such calendar quarter on the wages paid with respect to the employment of all employees of the employer.

If the amount of the credit under subsection (a) exceeds the limitation of paragraph (1) for any calendar quarter, such excess shall be treated as a credit allowed under subsection (a) against the applicable employment taxes for the following calendar quarter.

In the case of an employer allowed a credit under subsection (a) against an applicable employment tax for any calendar quarter, if the employer for any subsequent calendar quarter fails to make the return and payment of applicable employment taxes electronically, such tax shall for such subsequent calendar quarter be increased by the amount of such credit so allowed.

In the case of an employer with respect to which subparagraph (A) applies for any quarter, no credit shall be allowed under subsection (a) for any subsequent quarter.

A taxpayer shall not be treated as failing to make the return and payment of applicable employment taxes electronically for purposes of paragraph (1) under such circumstances as the Secretary may by exception provide, including an employer’s lack of ready access to broadband or convenient online services due to rural or other geographic barriers or emergency situations where electronic filing and payment would cause undue hardship.

For purposes of this section, in the case of a third party provider, including a payroll service provider, who for the 1-year period preceding the filing of any return to which paragraph (1)(A) would apply (without regard to this subparagraph) filed electronically at least 99 percent of all returns described in subsection (a) that were made by the provider during such period, no credit shall be recaptured under paragraph (1)(A) by reason of such return.

For purposes of this section, the term applicable employment taxes means the following:

(1) The taxes imposed by subsections (a) and (b) of section 3111.

(2) So much of the taxes imposed by section 3221 as are attributable to the rates in effect under subsections (a) and (b) of section 3111.

All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (m) or (o) of section 414, shall be treated as one employer for purposes of this section.

No credit shall be allowed under this section to the Government of the United States, the government of any State or political subdivision thereof, or to any agency or instrumentality of any of the foregoing. The preceding sentence shall not apply to any organization described in section 501(c)(1) and exempt from tax under section 501(a).

The table of sections for subchapter D of chapter 21 of such Code is amended by adding at the end the following new item:

The amendments made by this section shall apply to calendar quarters beginning after the date of the enactment of this Act.

Chapter 25 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

The Secretary shall impose a user fee of $250 on each submission other than by electronic means of any quarterly or annual return required with respect to the collection of the tax imposed by chapter 21 or 23A.

For purpose of this section—

The Secretary shall establish procedures for granting exceptions to the fee imposed by subsection (a) where electronic filing is not feasible, including for under any of the following circumstances:

(A) Any employer not required to make a quarterly return of the taxes imposed by subtitle C.

(B) First and second-time submissions filed other than by electronic means shall have the user fee waived, with a written notification sent to the employer outlining the electronic submission requirement.

(C) Employers who do not have ready access to broadband or convenient online services due to rural or other geographic barriers.

(D) Certain emergency situations where electronic filing and payment would cause undue hardship.

(E) Recent victims of identity theft or cybercrimes where submissions other than by electronic means might be necessary or desirable.

(F) Such other circumstances as may be provided by the Secretary in regulations or other guidance.

Any person qualifying for an exception under this section or other applicable law shall be provided alternative submission options such as a paper filing.

In the case of a third party provider, including a payroll service provider, who for the 1-year period preceding the filing of any return to which subsection (a) applies filed electronically at least 99 percent of all returns described in subsection (a) that were made by the provider during such period, no user fee shall be imposed with respect to such return under subsection (a).

The table of sections for chapter 25 of such Code is amended by adding at the end the following new item:

The amendments made by this section shall apply to returns required to be made for periods ending later than 2 years after the date of the enactment of this Act.