From the Oct. 2009 Issue
Despite all of the advances made in business accounting technology over the past decade, many small businesses and household employers still lack a system that provides year-end wage and information reporting. Whether this is because the company uses “shoebox” bookkeeping practices or is running a program without those capabilities (or with one but not the other), the fact remains that each year these businesses face the time-consuming and penalty-laden tasks associated with W-2 and 1099 compliance.
And although these two tasks are distinctly separate (one is payroll, the other AP), they remain tied together, at least in the minds of those charged with managing the compliance processes, since they both occur at the end of the year and often involve reporting to the same agencies. With the continuing growth of payroll services being offered by accounting firms, the tasks are increasingly being handled by these firms, or at least guided.
Fortunately, there is an abundance of inexpensive systems available specifically for W-2 and 1099 processing, some that also offer after-the-fact payroll capabilities, but all of which can be used to manage the basics of providing employers and contractors with recipient copies and also filing to the IRS and SSA. They also all provide electronic filing mechanisms that take advantage of those agencies’ online data upload websites.
The most notable differences in these programs is generally in the forms that they support, mostly the extent of the 1099 family, and in the volume of forms that can be reasonably managed through them. The workflow processes in the programs are what determines this last factor: What import functions are available? What multi-user review processes are followed? What reporting is offered? How about batch printing and output of mailing labels for recipient copies?
These can certainly be tedious processes, especially when working with higher volumes. But if you look at the potential penalties for late or non-compliance, year-end reporting is not a chore to be underappreciated.
Whether the ability to produce W-2s and 1099s is included in your clients’ bookkeeping software or you manage these functions for them, it’s crucial that a system is in place that helps streamline the tasks involved and helps ensure compliance.