1. Presented by Robert Anuszewski and Melodye Mitchell Modernized e-File

2. Agenda Filing Season 2016 – A Look Back Filing Season 2016 Challenges Filing Season 2016 Statistics Filing Season 2016 Performance Measurements FS2015 & FS2016 Daily Transactions Filing Season 2017 Scope Communications Questions 2

3. Filing Season 2016 – A Look Back Security Summit Updates –Additional Fields ACA (Affordable Care Act) –AVS Interface to ATS FATCA (Foreign Account Tax Compliance Act) –Form 1042-S (PDF) attached to 1120-F Legislative Operations & Maintenance Performance & Infrastructure EMS was officially shut down in December 2015 3

4. Filing Season 2016 - Challenges MeF performed very well. This success is marked by the incredible partnership we have with our Industry preparers, software developers, transmitters/EROs, and states. Additional fraud initiatives were implemented. 4

5. 2016 Filing Season Statistics Midnight Friday 4/24/16 vs Midnight Friday 4/24/15 Transmitted 2016 Total2015 Total % of Change Federal Returns Total164,369,013158,003,4864.02% Fed/State (Linked) Made Available81,124,27776,515,0416.02% State Standalone Made Available8,714,8708,196,1946.32% Total State Made Available89,839,14784,711,2356.05% MeF Total254,208,160242,714,7214.74% 5 The following data is intended for informational purposes only for internal business decisions. The official IRS filing season statistics are posted within the Newsroom section of IRS.gov.

6. Notable Statistics Federal BMF Increase (EMS Shutdown) Highest Percentage of Growth (more than 100% increase): –MAST, KACT, ORCT, ALST Increased Volume by 200,000 or more state submissions: –NYST, NJST, OHST, NCST, PAST, ILST 6

7. 7 Summary of Observations Lower peak day volume than FS2015 Lower 7-day volume than FS2015 except for BMF Higher accumulated volume than FS2015 Expect more volume from ME and MA who are not due until 4/19 About Volumes (How many?) Highest hourly average ack rate of 227 exceeds the highest ack rate of 214 for FS2015 Ack rate consistently matching receipt rate for all except one hour of the peak day, indicating no or insignificant backlog in ack generation About Throughput Performance (How fast?) Overall, very smooth April peak About Operations (How smooth?)

8. 8 3-Year Peak Day Volume Comparison Lower peak day intake than last year on all submission categories The states of Maine and Massachusetts weren’t due until 4/19 so volumes for “The Day After Peak” were slightly higher than last year

9. 9 3-Year 7-Day Peak Period Total Volume Comparison 7-day intake lower than last year on all submission categories except BMF More volume came in on 4/19 than 4/16/2015 since ME and MA are not due until 4/19

10. 10 3-Year Filing Season Accumulated Volume Comparison Overall increase of volume in each submission category If ME and MA were also due on 4/18, the increase would be even higher

11. Filing Season 2017 (TY2016) Scope and Changes

12. Filing Season 2017 Scope Affordable Care Act (ACA) O&M activities FATCA O&M Activities MeF O&M Activities 1040NR Individual Return Type, which includes 7 New Children Forms that can be attached to the 1040NR Individual not currently on the MeF platform Updates to 120 shared forms and schedules currently on the MeF platform, including modified business rules 1 New PDF Form 4 PDF forms currently on the MeF platform can be attached to the 1040NR Individual Legislative Additional Security Initiatives 12

13. FY2017(TY2016) 1040 Changes There will be a change to the ATS scenarios. The 2 forms below can be attached to the 1040/1040A parent forms are: SSA 1042-S RRB 1042-S There will be additional business rules implemented for Tax Year 2016 to address verification of insurance coverage. Additional details will be provided when they are available.

14. New Tax Type 1040NR FORMNAME 1040NR IndividualU.S. Nonresident Alien Income Tax Return FORMNAME 8288A Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests 8805Foreign Partner's Information Statement of Section 1446 Withholding Tax 8840Closer Connection Exception Statement for Aliens 8843Statement for Exempt Individuals and Individuals With a Medical Condition 8854Initial and Annual Expatriation Information Statement RRB-1042SRailroad Retirement Board - 1042S SSA-1042SSocial Security Administration - 1042S One (1) new PDF form 8233 120 Existing Shared Forms may be attached to 1040NR Seven (7) new forms are being developed.

15. Phased 1040NR Implementation Proposed Phased in Implementation Implementation of the 1040 NR form for electronic submission will occur in three phases: o TY2016 IMF components of 1040NR is scheduled for implementation in January 2017 o TY2017 Dual Status is scheduled for implementation in January 2018 o TY2018 1040 NR-EZ and associated forms and schedules is scheduled for implementation in January 2019

16. Achieving a Better Life Experience (ABLE) Act 1099-QA “Distributions from ABLE Accounts” 5498-QA “ABLE Account Contribution Information” 8809 “Application for Extension of Time To File Information Returns” 8508 “Request for Waiver From Filing Information Returns Electronically” Phased Implementation Proposed Phase 1: For TY2016, ABLE forms (1099-QA, 5498 –QA, 8809, 8508) will submitted to IRS on paper only in January 2017 Phase 2: Electronic submission of ABLE Act forms is scheduled for implementation in January 2018 o New schema structure o Increase in file size o Improved error messaging o Streamlined documentation o Elimination of separate transmittal forms for electronic filing o Singular TCC for ACA and ABLE forms o Jurat signature available on elecctronic waivers and extension

17. Achieving a Better Life Experience (ABLE) Act Proposed regulationswere issued in June of 2015 for tax-favored Achieving a Better Life Experience (ABLE) accounts. Changes to the proposed regulations were highlighted Notice 2015-81(PDF, 59KB), issued on November 20, 2015. These changes will be included in the final regulations. o Categorization of distributions not required: ABLE programs need not include safeguards to determine which distributions are for qualified disability expenses, nor are they required to specifically identify those used for housing expenses. o Contributors’ TINs not required: ABLE programs will not be required to request the taxpayer identification numbers (TINs) of contributors to the ABLE account at the time when the contributions are made. o Disability diagnosis certification permitted: Designated beneficiaries can open an ABLE account by certifying, under penalties of perjury, that they meet the qualification standards. o The state residency requirement has been removed.

18. Employment Tax Changes Information Return Processing TY2017 18

19. Form 941 TY2017 Proposed Changes Page 1 New line 11. Line 11 was added to report the amount of allowable research credit the employer is taking against the employer share of social security tax. The employer must attach new Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities. New line 12. Line 12 was added to provide a total for taxes after adjustments and credits, which is the employer's tax liability for the quarter. As a result of adding new lines 11 and 12, all subsequent lines were renumbered. Page 2 Line 16. The references were changed for the line that reports the total tax liability of the employer for the current quarter and prior quarter. Note 1: As a result of adding line 11, reference changes will be made on Forms 8453- EMP, 8879-EMP, Sch. B (Form 941), and Form 941-X. The changes on these forms will appear in future circulations. Note 2: Conforming changes will be made to related Spanish products. 19

20. 941 Schedule R New column (b). This column was added to assist with compliance of the new CPEO program. This new column is used to identify which code section applies for the wages, tips, and other compensation the CPEO is reporting for that particular client. All subsequent columns were "relettered." there are only 3 entries that can be used in column b. The allowed entries are single-letter codes "A," "B,", or "C." PL 113-295, Division B, Section 206 New column (g). column (g) was added to report the qualified small business payroll tax credit for increasing research activities. All subsequent columns were "relettered." Column (h). Due to adding new lines on Form 941 to report the payroll tax credit, the line number reference in column (h) changed from 10 to 12. Column (i). Due to adding new lines on Form 941 to report the payroll tax credit, the line number reference in column (h) changed from 11 to 13. 20

21. Communication MeF Program Information: http://www.irs.gov/Tax-Professionals/e-File- Providers-&-Partners/Modernized-e-File-Program- Information - Contains links to the family of MeF Web Pages such as the MeF User Guides & Publications and Status Page: Mailbox for Modernized e-File Send questions to mefmailbox@irs.gov 21

22. Questions? 22