Your Finance folks’ year-end processing might be in the back of their minds right about now, but the feds have it front and center – and they’re planning some big changes.
President Obama’s budget for fiscal year 2013 outlines a slew of changes to help IRS capture more tax info, which means more time-sensitive legwork and required e-filing for A/P.
Read on for a breakdown of the planned changes, as well as how your department can avoid 1099 headaches.
More up-front TIN-gathering
The biggest change could lead to dealing with far fewer B-Notices and less backup withholding – at the cost of a lot of up-front work with vendors.
Under current regs, your company can obtain a Taxpayer Identification Number (TIN) from contractors and vendors at any time.
Most obtain a W-9 upfront so they don’t have to scramble for it during 1099-reporting season, but there is no requirement to get the TIN early on.
That could soon end: IRS would require companies to collect and verify TINs for every vendor they pay.
How those TINs will be verified is still up in the air, but it’s likely that IRS’ online TIN-Matching program would factor in. If you haven’t signed up yet, it’s worth checking out.
E-file ‘option’ phasing out
While many businesses already cross IRS’ electronic filing threshold of 250 or more of one type of 1099, the feds are pushing even more companies away from paper.
Obama’s budget calls for cutting the 250-return limit over several filing seasons, with the eventual goal being mandatory e-filing.
As of right now, opting to e-file 1099s gives your company more time to process the forms – they’re due to IRS on March 31 instead of the Feb. 28 due date for paper returns.
But that benefit could be on IRS’ chopping block. As more companies are required to e-file, that built-in buffer period could be whittled down.
Your best bet: If you’re still using paper, consider going electronic next filing season. It will give you a chance to adjust to the new processes while you still have the extra time to straighten out any issues.