It’s that time again! A/P departments everywhere are getting ready to get those 1099s into vendors’ and ultimately IRS’s hands. You have more reason than ever to get this task right.
The Small Business Jobs and Credit Act of 2010 included provisions that dramatically raised the penalties for 1099 compliance errors.
And those bigger teeth are effective Jan. 1, 2011, which means the information returns finance departments are working on now will be impacted.
Fortunately you have two technology tools at your disposal to stack the odds in your company’s favor that you’re in compliance.
The first technology you need: The IRS TIN Matching System
Be sure A/P is availing itself of this backstop before those 1099s are filed. The Interactive TIN Matching will accept up to 25 payee TIN/Name combos on-screen. Want to check more than that, and your company will have to submit a text file as part of the Bulk TIN Matching program. (Little chance you’ll go over the limit there IRS will verify up to 100,000 name/TIN combos.)
And the system’s available 24 hours a day, 7 days a week.
Get it here.
Why your company can’t afford to get it wrong: The penalty for missing or incorrect names and taxpayer ID numbers (TINs) has now increased to $100 per record. That’s up from $50 per record.
The second technology you need: The IRS Filing Information Returns Electronically (FIRE) system
That first technology will give you more confidence the forms you are sending are accurate. But that only takes you so far if the 1099s aren’t received by IRS in the right format.
With the FIRE system, you can be assured your returns will be in the proper format now that magnetic media is no longer accepted.
One caveat: You do need IRS authorization ahead of time. The good news? There’s still time for Tax Year 2010 to get signed up.
Get it here:
Why your company can’t afford to get it wrong: For returns filed late, incorrectly or on incorrect media, the first-tier penalty doubles to $30 per return, the second-tier doubles to $60, and the third-tier doubles to $100.
Has your company already used either (or both) of these systems? Let us know what your experience was with them here.
