Electronic Filing Improvement and Logistical Efficiency Act of 2025
- Sponsor
- Rep. Malliotakis, Nicole [R-NY-11]
- Committees
- Ways and Means Committee (primary)
- Last action
- Dec 4, 2025
Bottom line
The bill aims to significantly increase electronic filing of employment taxes by incentivizing e-filing with a credit and disincentivizing paper filing with a fee, while requiring the IRS to modernize its systems.
What it actually does
This bill mandates the Internal Revenue Service (IRS) to establish a fully automated electronic filing and payment system for all employment taxes within one year, prioritizing Form 941-X. It also creates a new tax credit of $1,000 for employers who electronically file and pay their employment taxes for the first time, with a potential second credit in the following year. Concurrently, it imposes a $250 user fee for paper filing of employment tax returns, with several exceptions for hardship or initial non-compliance.
Proponents argue
Proponents argue that modernizing the employment tax filing system is long overdue, reducing the administrative burden on businesses and the IRS. They contend that the current reliance on paper is inefficient and unsustainable, leading to errors and delays. The combination of incentives and disincentives, coupled with IRS system improvements, will streamline processes, improve data accuracy, and save resources for both taxpayers and the government.
Opponents contend
Opponents might argue that imposing a user fee on paper filing, even with exceptions, could disproportionately burden small businesses or those in rural areas with limited internet access, despite the stated exceptions. They may also contend that the tax credit is an unnecessary expenditure, and that the IRS should simply be mandated to improve its systems without additional financial incentives or penalties for taxpayers.
The bill is short and relatively straightforward, making it accessible for an informed reader to evaluate within a short timeframe.
Section 2
Sense of Congress on Electronic Filing
This section expresses Congress's belief that all employment tax forms, including amended returns, should be filed electronically. It highlights the unsustainability of current paper reliance, identifies structural and behavioral obstacles, and states that the IRS must streamline processes while laws incentivize electronic filing to overcome taxpayer behaviors.
Supporters argue
Proponents argue that a clear statement of congressional intent is crucial for guiding the IRS and signaling to the public the importance of modernizing tax administration. It establishes the foundational policy goal for the subsequent operative sections of the bill.
Critics contend
No specific opposition is typically raised against a 'Sense of Congress' provision, as it is non-binding. However, critics of the overall bill might view it as a preamble to potentially burdensome mandates.
Tradeoffs
This section sets a broad policy direction without imposing direct legal requirements, balancing the desire for clear guidance with the flexibility needed for implementation.
Section 3
Mandate for IRS Electronic Filing System Improvements
Within one year of enactment, the IRS is required to implement a fully automated electronic process for all employment tax filing and payment requirements, including amended returns. The initial focus is specifically on the adjusted employer's quarterly Federal tax return or claim for refund (Form 941-X). The IRS must make all necessary technical and business changes to ensure e-filing is the most convenient and efficient method.
Section 4 (New IRC Section 3135)
Electronic Filing Tax Credit for Employers
This section establishes a new tax credit for employers who electronically file and pay their employment taxes. An employer can receive a $1,000 credit for the first calendar quarter they fully e-file and pay, and another $1,000 credit for one elected quarter in the subsequent year if they continue to e-file. The credit is limited to the amount of applicable employment taxes for the quarter and can be carried forward. A recapture provision increases taxes if an employer stops e-filing after receiving a credit, with exceptions for extraordinary circumstances (e.g., lack of broadband, emergencies) and for high-volume third-party filers.
Section 5 (New IRC Section 3513)
User Fee for Paper Filing of Employment Taxes
This section introduces a $250 user fee for each quarterly or annual employment tax return submitted by non-electronic means. The Secretary of the Treasury is directed to establish procedures for granting exceptions to this fee. These exceptions include employers not required to file quarterly returns, first and second-time paper filers (who receive a waiver and notification), those lacking broadband access or convenient online services, emergency situations, and victims of identity theft or cybercrimes. Third-party payroll providers who electronically file at least 99% of their returns are also exempt from the fee for specific paper submissions.
The bill includes a 'recapture' provision for the electronic filing credit. If an employer receives the $1,000 credit for e-filing and then subsequently fails to e-file in any later calendar quarter, their tax for that subsequent quarter will be increased by the amount of the credit previously allowed.
Section 4(c)(1)(A) (New IRC Section 3135(c)(1)(A))
Why it matters:This is standard legislative practice for tax credits to ensure compliance and prevent abuse. It's a necessary technical detail for the integrity of the credit.
Case for: Proponents argue that the recapture mechanism is crucial to ensure the credit incentivizes sustained electronic filing, rather than just a one-time switch. It prevents employers from claiming the credit and then reverting to paper filing.
Case against: Critics might argue that the recapture rule adds complexity for employers, who must track their e-filing status across quarters. A single lapse could lead to an unexpected tax increase, potentially penalizing employers for minor errors or temporary issues.
Estimated impact: This provision ensures the long-term effectiveness of the credit, potentially increasing overall e-filing rates and preventing revenue loss from non-sustained compliance. The fiscal impact is indirect, by preserving the intended behavioral change.
Both the tax credit recapture provision and the paper filing user fee include a special exception for 'certain bulk filers.' Third-party providers, such as payroll service providers, who electronically filed at least 99% of all applicable returns in the preceding year, are exempt from the recapture of the credit and the imposition of the user fee for any specific paper return.
Section 4(c)(2)(B) (New IRC Section 3135(c)(2)(B)) and Section 5(b)(2) (New IRC Section 3513(b)(2))
Why it matters:This is a technical but important detail designed to accommodate the realities of large-scale payroll processing, where a very small percentage of paper filings might be unavoidable for various reasons, without penalizing providers who are overwhelmingly compliant with e-filing.
Case for: Proponents argue that this exception is practical and fair, recognizing that even highly compliant bulk filers might encounter rare circumstances necessitating a paper filing. It prevents disproportionate penalties on entities that are actively promoting e-filing for a vast number of employers.
Case against: Critics might argue that any exception, even for bulk filers, could create loopholes or reduce the incentive for 100% electronic compliance. However, the 99% threshold is quite high, making this argument less potent.
Estimated impact: This provision ensures that the largest volume filers are not unduly penalized for minor, unavoidable deviations, thereby maintaining their support for the overall e-filing initiative. It helps prevent disruption to the payroll industry.