Managing the W-2 and 1099 Preparation Process
Preparing the documentation required for tax preparation is a year-round concern for businesses even if tax season is typically only a few weeks before the April 15 regular deadline. Internal Revenue Service guidelines direct employers to provide W-2 or 1099 documents to employees or contractors with annual earnings of at least $600 by January 31. A copy of these documents should be filed with the IRS accompanied by form W-3 or Transmittal of Wage and Tax Statements for each W-2.
Preparing the W-2 or 1099
The format of the W-2 or 1099 may vary from one company to the next, but the IRS specifies information that should be included in these forms so that tax filers will have the required information to complete their tax returns. Specifically, the documents should indicate the business’ tax identification number, demographic data pertaining to the employee, the amount of wages earned and total taxes withheld. The 1099 provided to contract staff includes the same basic information except for taxes withheld.
Processing and Distributing W-2 and 1099 Forms
Clearly, generating the W-2 and 1099 forms is a tedious process that takes up precious hours and ties up administrative personnel. Meeting the deadline for distribution is important to ensure that employees can have their W-2s or 1099s in time to meet their own tax filing deadline.
Additionally, the IRS may impose financial penalties on businesses who fail to provide the required tax documents to employees within the given periods. For small businesses, the maximum penalty for filing 30 days later than the deadline is $75,000, rising to $200,000 if filed by August 1 and $500,000 after August 1. Penalty amounts vary depending on the size of the business and the extent of tardiness. To avoid penalties, businesses can request for an extension using Form 8809.
The Outsourcing Solution for Payroll Services
Companies that have streamlined their operational strategies by outsourcing non-core tasks such as payroll services have the additional advantage of turning over the W-2 process, filing and distribution to the third party provider. At Integrated Payroll Services, a Waukesha payroll services company, we make sure that our clients are compliant with IRS guidelines by handling the preparation, printing and distribution of W-2s and 1099s. Being an iPS client means that your company’s payroll information is already part of our database, so generating the W-2s for mailing should be accomplished quickly.
Additionally, iPS can also take charge of transmitting the payroll and tax information to the IRS and the Social Security Administration, ensuring that the company meets guidelines and deadlines. iPS provides a comprehensive package of services, including online payroll preparation and distribution, report generation and tax document processing. Service packages are scalable to the client’s requirements so that you pay only for the type of service that your business needs.