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Are your company’s 1099s and W-2s error-free? 4 best practices

are your company’s 1099s and W-2s error-free 4 best practices
Alyssa Evans
by Alyssa Evans
December 12, 2019
  • Accounting
3 minute read
  • SHARE ON

Of all the strict IRS requirements your finance team strives to meet at year-end, accurate 1099s and W-2s hit the top of the list.

The good news is, Finance has really stepped up its game on that front. In fact, the number of 1099-MISCs with missing or incorrect TINs has dropped 80% in recent years, from about 64,000 in 2009 to 13,000 in 2016. That’s according to a report from the Treasury Inspector General for Tax Administration.

Of course, you want to keep that positive momentum going for all your information returns this year-end and in the future. Check out four ways your finance team can continue the trend of accurate information returns:

1. Utilize trusted resources

First, for A/P, it’s worth mentioning the Service’s classic TIN Matching Tool. It’s a surefire way to catch missing or incorrect TINs. Depending on your headcount and time available, your team can choose to use either:

  • interactive match (accepts up to 25 TINs for immediate results), or
  • bulk match (accepts up to 100,000 TINs for results within 24 hours).

Plus, IRS has other resources for A/P, like videos on securing W-9s and backup withholding.

And on the W-2 front, Payroll can use the Social Security Administration’s services to verify Social Security Numbers (SSNs). There’s also a page with tips on how to avoid the most common W-2 errors.

These trusted resources may be especially useful for any finance pros who are less seasoned or need a good refresher on compliance.

2. Prioritize other forms, too

There’s a good chance that most of your information returns are 1099s and W-2s, but foreign vendors’ 1042-Ss can be even more complex and error-prone. That’s why those forms need just as much attention as the others.

Fortunately, the latest version of the Form 1042-S Instructions includes a box-by-box breakdown of:

  • which boxes need entries
  • which boxes you can leave empty, and
  • comments explaining why.

Advise your team to check out Page 34 of the instructions to review this appendix and verify they’re well prepped.

3. Add some crosschecking

Getting a second set of eyes can help your finance team spot overlooked errors. And for information return accuracy, Payroll and A/P are the perfect duo. Both teams are very familiar with information returns and know the importance of IRS compliance, but they each bring a fresh perspective to find errors that might have slipped by the other group.

While Payroll eyes 1099s and 1042-Ss, A/P can take a second glance at W-2s. A little teamwork will go a long way to reduce the risk of mistakes and penalties.

4. Make it a year-round effort

You know all too well that trying to get updated information from vendors and employees right before year-end deadlines can be a nightmare for your team. Going forward, A/P and Payroll can make it more manageable by breaking it up throughout the year.

Each month or quarter, A/P can check in with a certain group of vendors to:

  • Verify the info it has on file is current (e.g., business name, address, TIN).
  • Ask if they know of or foresee any major business changes happening soon (e.g., a new bank or a different location).

And in a similar way, Payroll can reach out to certain groups of employees to:

  • Make sure employee info is up to date (e.g., name, address, SSN).
  • Ask whether they expect anything to change soon.
Alyssa Evans
Alyssa Evans
Alyssa, a member of the CFO Daily News staff, has written extensively on business and finance for several years. She has produced content for accounts payable professionals and finance executives and has developed whitepapers and infographics for the finance and accounting industry.

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