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.