Tired of spending hours on payroll and tax filings every season?
Running payroll, preparing taxes, and filing W-2s and 1099s is a nightmare for every business who processes information returns. From chasing contractors for payment details, entering information on dozens of individual forms, filing those forms on time with the IRS…
There’s just so much room for error.
And that’s the problem.
Most companies today are stuck using outdated manual processes. Mistakes happen. Deadlines are missed. The IRS comes knocking with penalties.
Thankfully, building a smarter tax filing workflow is simpler than you might think.
Let’s break down the tools and information you need to process payroll and information returns more efficiently.
What you’ll pick up
- Why Data Entry Software is Crucial for Tax Processing
- Common Mistakes with Payroll and 1099 Filing
- Tools Every Business Needs for Smarter Tax Processing
- Step-By-Step Guide to Streamlining Information Return Processing
Why Data Entry Software is Crucial for Tax Processing
You may have noticed, tax season keeps getting bigger every year.
The GAO released a report showing the IRS received over 5 billion W-2s and information returns last year. That’s a crazy amount of data going through their systems. What’s crazier is each and every one of those returns needs to be accurate.
This is why data entry software is so important. Processing tax forms by hand is tedious and comes with errors. Specialized software eliminates manual mistakes, completes forms faster, and ensures the IRS receives the correct information. For businesses who regularly file 1099-NEC, 1099-MISC, W-2s, and more… reliable IRS 1099 e-file software is going to be a lifesaver.
Think about how easy it would be
If you could automate your payroll data and contractor payments instead of manually entering the information across dozens of different forms. No more mistakes. No more IRS notices. Just simple and seamless tax filings.
Data entry software does exactly that. Automatically validate info as you type it, scan for mistakes prior to filing, and organize your records all in one spot.
Common Mistakes with Payroll and 1099 Filing
First things first, let’s review the most common mistakes that businesses make when preparing payroll and 1099 taxes.
Filing Too Few Returns. Believe it or not, this is a common problem. The IRS electronic filing threshold used to be 20 returns, but they lowered it to 10 beginning January 2024. If your business files 10+ W-2s and 1099s combined, you are required to file electronically. Failure to do so will result in penalties.
Incorrect Information. Misspellings, incorrect social security numbers, mismatched Employer Identification Numbers (EIN), etc. These sorts of clerical issues are everywhere. The IRS has systems in place to catch incorrect taxpayer info which results in both the filer and information return recipient getting notices.
Missing deadlines. Deadlines for employers to file 1099-NEC is January 31st. 1099-MISC has a February 28th paper deadline and March 31st e-file deadline. Each day these deadlines are missed, you will be penalized more.
No Backup. Once a return or form is completed by businesses, they are often not stored anywhere. Always keep backups of payroll information and completed forms just in case.
The common denominator in all of these situations? Software that validates your data and a better filing workflow.
Tools Every Business Needs for Smarter Tax Processing
Now for the good stuff. Let’s review the absolute essential tools that businesses should use when preparing payroll and processing information returns.
Tax Filing Software
Starting with the basics. Tax filing software should do everything for you. From creating the forms, validating information against IRS databases, to even e-filing right to the IRS. Look for software that can handle W-2s, 1099-NEC, 1099-MISC, and any other information returns your business may file.
Ideally your software can manage state filing requirements too. That saves you tons of time.
Payroll Tools
Okay, so payroll and information returns go together like peanut butter and jelly.
Quality payroll software calculates payroll amounts, withholding, etc. automatically. Once that process is complete, it can send that info directly to your filing platform.
Here’s the kicker:
With the right software, your payroll data does not need to be re-entered anywhere else. That means one less chance for errors.
Data Validation / Error Checking
This may be an obvious one, but don’t overlook built-in validation tools.
Software can only catch misspellings and clerical errors if you allow it to. Programs that validate TIN numbers with the IRS, detect duplicate information returns being filed, and formatting checks are extremely valuable.
The IRS FY 2024 Data Book reported the IRS electronically processed over 219 million returns and forms in 2023. The IRS can’t manually check each return for accuracy. A few small errors on your end can create huge headaches.
File Storage / Record Keeping
Are you storing every tax filing your business completes? You should be. All businesses must keep a safe paper trail of their information returns for at least four years.
Use cloud storage that integrates with your filing platform. This makes storing and retrieving info painless.
Oh and here’s another bonus…
Proper record keeping allows you to amend and make corrections to filings quicker.
Step-By-Step Guide to Streamlining Information Return Processing
Great tools are only useful if you know how to use them. Follow this step-by-step guide to streamline your tax filing process.
Step 1: Gather All Payee Information ASAP. Don’t wait until January. Have your contractors and vendors send you W-9s as soon as you start working with them.
Step 2: Import Into Data Entry Software. Take your payroll information and payee info and import everything into your tax filing software. Run it through the validation tools.
Step 3: Generate Forms. Have the software generate all required W-2s, 1099s, and any other forms your business may be responsible for. Double check for accuracy.
Step 4: E-File and Distribute. E-file with the IRS. Make sure recipient information returns are distributed by the deadline too.
Step 5: Archive. Store copies of your filings and distributions with your cloud storage.
That’s it. Five simple steps and the entire tax filing workflow is streamlined.
Wrapping Up
Building a smarter tax workflow is simple when you know what tools to use.
Between manual processing errors and the IRS electronic filing threshold changing, there is plenty of room for businesses to make mistakes.
Here’s a quick recap:
- Use dedicated tax filing software that allows you to e-file all information returns your business may file
- Keep your payroll and filing tools integrated to remove unnecessary manual data entry
- Validate your data prior to filing with built-in tools
- Take advantage of electronic filing to the IRS
- Keep records of all your filings in one place
Businesses who understand this flow spend less time filling out paperwork. They spend more time growing their business.
