Paper-based 1099 filing is on its way out as the Feds push everyone towards 1099 e-filing. Is your agency required to e-file this year?
Let’s take a look at the latest government 1099 filing requirements.
1099 Filing Regulations in 2022
Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G can be filed electronically – except forms 1099-QA and 5498-QA, which must be submitted on paper.
Organizations filing 250 or more information returns of any one kind are now required to e-file. This 250-return threshold is individually applied to each form type, with originals and corrections counted separately.
Here’s what that might look like:
- Someone filing 249 1098-series reports and 249 1099-series reports has the option to make the returns on paper,
- Someone filing 249 1098-series, 40 1098-series corrections, 400 1099-series reports, and 250 1099-series corrections has the option to file the 1098 returns and corrections on paper but must e-file the 1099s,
- Someone filing 250 1097-series reports, 400 1099-series reports, and 250 1099-series corrections is required to e-file all of them,
- And everyone has the option to file electronically unless submitting forms 1099-QA or 5498-QA.
How to Get Around 1099 E-Filing Requirements
You can request a waiver to be exempt from the 1099 e-filing requirements. To do this, submit Form 8508 at least 45 days before the return due date. Waivers are made one tax year at a time. If you want subsequent waivers, you will have to reapply for them.
This waiver is granted to original returns and will cover any corrections that need to be made to them.
1099 E-Filing Penalties
Unless you have a waiver, there are penalties for failing to file electronically if required to do so.
The government will fine up to $290 per return for organizations that don’t establish reasonable cause. And like the threshold, the penalty applies separately to original returns and corrections.
You might be used to doing things the old-fashioned way, but sooner or later, all information returns will need to be e-filed.
Proposed Changes to 1099 Filing Regulations
The government has proposed amending the filing threshold. The proposed amendments gradually reduce the e-filing threshold from 250, to 100, to 10, to zero.
If the amendment passes, the limit will move down to 100 for the next applicable tax year. The following year, it will be set at 10.
All information returns filed in subsequent calendar years will need to be electronically filed.
Advantages of 1099 E-Filing
Economical and Ecological
How much does your agency spend on printing and shipping physical 1099s? Those expenses and ecological costs add up. Along with added HR costs for extra employee hours wasted in preparation and sending.
Moving to 1099 e-filing saves on those costs while increasing the agency’s environmental friendliness. This might seem like a small move, but it’s an effective way to drive government sustainability forwards.
Convenient and Hassle-Free
1099 e-filing with a GovTech platform is much more convenient than hunting for yearly records, working with piles of files, and rustling through a stack of papers.
And you can make things even more convenient by using a single platform for operational financial management throughout the year.
An interoperable GovTech solution that unifies and streamlines accounting, record keeping, and other administrative needs make information report preparation even more expedient.
The more returns you need to send, the more imperative it is to switch to electronic 1099 filing.
Instant Verified Submissions
The IRS doesn’t send notifications acknowledging that it’s received paper returns. But there are submission acknowledgments when e-filing.
This alone is an advantage, especially if the post office is experiencing delivery delays or complications. Agencies with more fastidious administrative practices can be assured that everything was submitted on time and went right on their end.
Agencies can use IRS-approved private delivery services as a CYA move. But those are added costs, especially when sending in high-volume reports. 1099 e-filing, on the other hand, is instant and verifiable.
Accuracy and Error Reduction
Paper filing is notoriously prone to errors and inconsistencies. Errors slow down processing times, puts your organization under enhanced scrutiny, and can also be expensive. The IRS charges penalties for incorrect information reporting. Fines range from $40 to $290 per incorrect return, with maximums of $206,000 to $3,532,500 per year.
Errors can happen on the IRS side as well. That’s because information on paper returns is manually entered into the IRS system. Yes, that’s right. When physical 1099 forms are sent in, an employee personally transcribes them into the system.
Any instances of errors and inconsistencies on their side further delay the processing time. If you want your government 1099 filing to be processed quickly, swap the messy paperwork for clean and accurate e-filing.
E-filing isn’t a guarantee of total accuracy. The human factor means errors are prone to occur, now and then. If one does occur, it’s much easier to file an electronic correction than to make a paper-based one.
Here’s how a paper 1099 gets processed.
- Incoming mail is machine-sorted and opened.
- Employees extract returns from their envelopes and sort them by type.
- Returns are batched into groups and logged into a computer for tracking.
- Employees correct errors, assign data entry codes, and may correspond with the sender to get more information.
- The return is stamped with an identifying number.
- Employees manually transcribe the returns.
- Return data is transmitted to the IRS’ Martinsburg Computing Center for verification and validity checks.
- Returns with errors are sent back to be corrected by employees.
- Corrected returns are sent back to the center, then copied to a master file.
Now here’s how a 1099 e-filing gets processed.
- You submit the e-file.
- The IRS system automatically scans it for errors and inconsistencies.
- If accurate, the system sends it to the Masterfile. If inaccurate, the system notifies you to make corrections.
See how streamlined and smooth 1099 e-filing is? And why sending in paper returns leads to backlogs? If you want to get things done and processed quickly, use GovTech to prepare and submit your 1099s.
1099 Filing Made Easy
1099 e-filing should ultimately make your information reporting tasks faster, more accurate, and more stress-free. But that’s only possible with the right solution in place.
Having to manually source information, retrieve data from multiple tools, and enter it into the report, will only slow things down and diminish the benefits you see.
It’s not a good idea to work without a systemized, traceable method designed just for municipal needs. Government reporting can be tedious and involved. There’s so much to keep track of and a variety of data to account for. Corrections and amendments often need to be made – sometimes while preparing the report or after its been filed. Plus, there are stringent compliance regulations on top of that.
GovTech for 1099 E-Filing
Sooner or later, all agencies will have to move to electronic filing. Many organizations are already required to do so. And there will be a point in time, when 1099 e-filing is the general standard and no paper information returns are permitted, without a special exception.
Please contact us now to book a personal demonstration on our GovTech financial solutions.