EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
How EY can help
Modernized e‑file
Final regulations on electronic filing requirements for Form 1042 will affect financial institutions, partnerships with at least 100 partners, and any entity (other than a trust or estate) that files 10 or more tax returns of any type for the reporting year.
US withholding agents had to e-file during 2025; non-US withholding agents must e-file in 2026. Filings are made using the MeF system via a schema that is provided only to IRS-approved providers. To use the modernized e‑file system, a filer must complete an application that identifies the firm, lists principals and responsible officials, and specifies which e-file roles the firm intends to fulfill.
Each principal and responsible official must be a US citizen or permanent resident and meet licensing requirements (such as an attorney, CPA, enrolled agent, or banker).
The IRS reviews the application and conducts suitability checks, such as ensuring past tax compliance. If accepted, the IRS will assign an electronic filing identification number, or EFIN.
To submit without third-party software, an entity must apply as a developer and undergo testing to ensure the software meets certain specifications. Even after approval, providers must undergo periodic monitoring to confirm the software complies with IRS rules.
Things to consider
IRS testing and approval for IRIS or MeF can take several months, and, in our experience, IRS trouble shooting support is limited. Developers should be prepared to support multiple updates, even after the end of that year’s reporting season. The IRS generally provides updates both before and after the start of the reporting season.
A separate software package also must be created and maintained for each tax year. For example, a filer amending a prior-year return like 2025 must use that year’s rules rather than the current-year rules.
For information returns, the A2A process is solely for transmitting data to the IRS and doesn’t create recipient forms. A user will need a means to generate the forms to be furnished to recipients.
The current regulatory environment has seen an increase in new forms (Form 1099-DA, Form 1098-VLI), as well as expected changes to Forms 1099-K and 1099-NEC to align with the 2025 tax-and-spending law. Software developers should plan accordingly to support these known and expected changes to forms.
States may require data transmissions to continue in their current format, creating a need to support additional layouts.
The IRS doesn’t publish all the error codes and reasoning, requiring the development of a consolidated list of IRS validations. Some of these errors will cause a rejection if they exceed a threshold and those thresholds aren’t published within the IRS business rules.
Key takeaways
Converting to IRIS for filing information returns and e-filing of Form 1042 marks a major modernization in how the IRS receives and processes information and withholding tax returns. This will streamline the IRS acknowledgment of the filings and review of data.
This modernization requires filers to either maintain software or engage a trusted vendor that can provide not only the means to file but also sound logic and helpful validations to navigate all the changes and business rules.