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).
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.
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