Review of W-2/1099 Systems -- 2006

From the October 2006 Issue

I have a secret. I dread the month of March.

Mind you, it’s not because there are too many tax returns that need to be prepared, nor is it because of the long hours to be worked each week. I expect to be challenged by my practice — working hard and putting in long hours is nothing new.

However, what I never expected was the recurring nightmare of locating my passwords and pins to the IRS’s FIRE (File Information returns Electronically) website and the Social Security Administration’s BSO (Business Services Online) website. As all practitioners who file online electronically know, you cannot access either website without these passwords and pins. If you can’t login to these sites, you can’t upload the electronic files, which contain the annual tax statements for our clients. And the “gatekeepers” cannot help you either. New passwords and pins can be generated, but that can take two to three weeks.

Oh, and my recurring nightmare includes the BSO requirement that users login once a year to change their password: “Your BSO Registration Password will expire on 02-26-2007. You must change your password before this date to prevent it from expiring.”

Want to find out more?

• Login to the BSO at www.ssa.gov/bso/bsowelcome.htm
• Login to FIRE at https://fire.irs.gov/firev1r

In the past years (2005 and earlier), the Social Security Administration (SSA) and the IRS rules and regulations required employers who filed 250 or more Form W-2s or Information returns to file them on magnetic media (3.5-inch diskette) or online electronically.

For 2006 returns (filed in 2007), the SSA and IRS will no longer accept annual filings on 3.5-inch diskettes. All returns must be filed either electronically (more than 250) or on paper (less than 250). For tax year 2005, the SSA had announced that they would no longer accept W-2s filed on magnetic tape and cartridge.

Confused? Share my nightmare? Need help? Here is a guaranteed solution. Hook up with one of the great software vendors reviewed here. I can promise you that your requests for help and/or assistance in navigating the BSO or FIRE websites will be met with open arms and a “can do” attitude.

My wish list: A programmed electronic filing upload routine that will work flawlessly. Be advised, however, that the problem here is not with the software providers. Rather, it rests with the IRS and SSA who make changes at the last moment, don’t communicate them well, and haven’t built a front-end to accommodate the software developers. The fact is, software vendors reviewed here spend an inordinate amount of time supporting users who need assistance in navigating the IRS and FIRE “electronic environment.”

Bon appetit! 

- - - - - - - - - - - - - - - - - - - - - - - - - - -