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You are here: Home / Back to Basics / Taxes: Get Ready to Waste Lots of Time

Taxes: Get Ready to Waste Lots of Time

January 21, 2011 •

It was ironic that 3 local account­ing firms called me today to pitch their ser­vices, just as I was wrestling with the 1099 forms to file regard­ing pay­ments to inde­pen­dent con­trac­tors. At this time of year, there are mil­lions of small busi­nesses fac­ing sim­i­lar time losses due to tax fil­ings.

Case in Point: 1099 Forms

The effort of fil­ing 1099-MISC forms is just one of the many ways that the fed­eral gov­ern­ment wastes small busi­nesses’ time dur­ing tax sea­son. The 1099 sub­mit­tal process should be easy to mod­ern­ize: the forms aren’t com­pli­cated, and don’t appear to change that often.

Prepar­ing those forms should be quick and easy for busi­ness own­ers or book­keep­ers, espe­cially when using a good account­ing tool, like Quick­Books. If you’ve coded your book­keep­ing entries prop­erly, all the source data is already stored in QB: from the amounts paid to each 1099 con­trac­tor, their name and address; to the EIN unique iden­ti­fier the IRS uses for your busi­ness.

Alas, there is no intel­li­gent link between Quick­Books and the 1099 forms.

Even though the IRS is per­fectly happy to receive 1040 tax returns via an approved eFile resource, they do not allow small firms to file 1099 infor­ma­tion forms elec­tron­i­cally or fill in the Acro­bat forms avail­able on their web site.(There is, how­ever, an enter­prise-scale ser­vice for that.)

Here’s the friendly notice from the IRS, warn­ing busi­nesses not to use the Adobe Acro­bat ver­sion of the 1099 input form:

This form is pro­vided for infor­ma­tional pur­poses only. Copy A appears in red, sim­i­lar to the offi­cial IRS form. Do not file copy A down­loaded from this web­site. The offi­cial printed ver­sion of this IRS form is scannable, but the online ver­sion of it, printed from this web­site, is not. A penalty of $50 per infor­ma­tion return may be imposed for fil­ing forms that can­not be scanned.

You must file using the IRS’ preprinted forms, although there is a time-con­sum­ing method you can use with Quick­Books. The ben­e­fit of this approach is that the data will be faith­ful to what­ever is stored in your account­ing records. No risk of typos cre­ated dur­ing the form entry process.

The IRS appar­ently relies upon an anti­quated method that was state-of-the-art back in the go-go days of type­writ­ers and car­bon paper for dupli­cate copies. They require firms to fill out multi-part 1099-MISC forms using a method that can be scanned eas­ily by the IRS — or risk a $50 fine per return. It’s vital to the IRS that they receive Copy A of your 1099 form printed on their preprinted, red form.

I can’t help but won­der: if the banks can some­how man­age to scan and process checks printed from Quick­Books, why can’t the gov­ern­ment scan a form printed by Quick­Books? It’s not as if this is a design-inten­sive, highly vari­able doc­u­ment!

Today’s Solution for QuickBook Users

Today’s work-around is to print each page of the multi-part 1099 form sep­a­rately – for each 1099 con­trac­tor – as explained here by Intuit, unless you have a con­tin­u­ous printer. Assum­ing you work out the align­ment issues between Quick­Books and your laser printer, this method works just fine, but it requires con­sid­er­able atten­tion to detail and a lot of time. The more 1099 con­trac­tors you have, the more time it takes.

Be care­ful: the paper for all but the first copy of the 1099 form is flimsy. Your laser printer may jam if you try to rely upon auto­matic paper feed­ing, rather than print­ing one page at a time. Man­ual feed­ing, one sheet at a time, was the most reli­able approach for my HP Laser­Jet P2055 printer.

In the­ory I don’t mind noti­fy­ing the gov­ern­ment what I’ve paid to inde­pen­dent con­trac­tors. But in prac­tice I resent how much unpro­duc­tive time must be spent to send this infor­ma­tion to the IRS.

Let’s hope there’s a bet­ter way in 2012, given Obama’s call to stream­line government’s impact on busi­ness.

About This Blog

Reflec­tions on life, travel, books, and yoga. Think­ing out loud about the pur­suit of mind­ful­ness and well-being.

Learn­ing how to recover from the loss of a beloved spouse, and then to find a trans­for­ma­tive path for­ward.

About Me

Semi-retired marketing exec, transitioning from a career in high tech. Now "managed" by two Tonkinese cats. Missing travel and friends on the West Coast. Avid reader and foodie. Staying active with long walks, biking, kayaking and yoga.

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