State of Change: New York Shifts 1099-R Reconciliation from Annual to Quarterly Basis

Clark Sells
July 24, 2018

New York recently changed its requirements for validating and reconciling 1099-R data, providing another example of how states are changing regulations in order collect revenue more accurately and more quickly. Financial institutions will likely need to adjust their processes in response.

Institutions must file a form 1099-R for each person who received a distribution of $10 or more from programs such as profit-sharing or retirement plans, IRAs, annuities, pensions, insurance contracts and survivor income benefit plans.

Move from annual to quarterly reconciling of 1099-R information

Current rules in New York require paying institutions to submit a withholding filing on a quarterly basis to confirm timely and complete payments. In the fourth quarter of the year, payers add 1099-R information for the whole tax year in part C, section D and E of form NYS-45 in order to reconcile withholding payments, returns, and 1099-R information reporting. State revenue officials then review all four quarters of NYS-45 to make sure payments match those reported on form 1099-R.

However, the new regulation, which will take effect in January, will require payers to send 1099-R forms to the State of New York to satisfy part C of each quarterly filing. Essentially, the new rule requires organizations to reconcile 1099-Rs and withholding payments on a quarterly basis rather than on an annual basis.

Bringing accounting and tax departments together with a single solution

That could be a problem for financial institutions. In many operations, the accounting department handles payments and withholding returns, while the tax department deals with 1099-R information reporting. Unfortunately, the two departments often operate in silos, separated from each other due to having to follow different regulatory requirements in different states.

As a result, accounting and tax often fail to collaborate, and they use two different source systems for data. Using separate systems makes reconciling any differences in forms difficult and time-consuming when carried out on an annual basis. The process will be even more complex on a quarterly basis for reporting in the massive New York jurisdiction, as accounting and tax will have to work together both more frequently and more closely.

Payers need to consolidate accounting and tax reporting processes into one unified reporting solution, which will provide a consistent source for form data. A single solution will also enable companies to complete reconciliation and reporting more quickly and accurately, with less effort and using fewer employee resources.

A trend of states streamlining revenue collection

New York is not the first state to shift to requiring quarterly 1099-R reconciliation. California and Maine have had similar regulations in place for years. In a broader trend, states are changing requirements and moving up deadlines in an effort to collect revenue more quickly and accurately. For example, after the IRS moved deadlines for some 1099 forms up for tax year 2017, a group of states did the same. In most states, 1099-MISC with nonemployee compensation and W-2 forms are due by January 31.

With states needing revenue, more changes that bring complexity to the reporting process for payers are likely to emerge.

Take Action

Sovos has decades of experience consolidating reporting data and handling change in 1099 reporting processes for clients. Learn more or contact Sovos for more information.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Clark Sells

Share This Post

Tax Information Reporting United States
How to Respond to the Growing Challenges of 1099-R Reporting

The demographics don’t lie: Reporting for form 1099-R is only going to grow more difficult as baby boomers retire. The form used to report distributions from IRA, pensions, annuities and other similar retirement accounts is poised to explode in volume. As such, financial institutions (FIs) and insurance companies can’t afford to mishandle 1099-R reporting. The […]

E-Invoicing Compliance EMEA
Portugal Issues New E-Invoicing Rules: A Flavour of Clearance but Not Quite There

On 15 February 2019, Portugal published Decree-Law 28/2019 regarding the processing, archiving and dematerialization of invoices and other tax related documents including: The mandatory use of certified invoicing software General requirements for paper and electronic invoices Dematerialization of tax documentation Archiving of tax documentation (including ledgers, etc) Adjacent tax rules and obligations The decree aims […]

EMEA LATAM VAT & Fiscal Reporting
Are We in the Golden Age of VAT Recovery?

The value-added tax (“VAT”) was described in the EU as a “”money machine” over 20 years ago. Yet according to a 2015 study by the European Commission by the Centre for Social and Economic Research (CASE), the “VAT gap” was approximately 168 billion EUR. This represents 15 percent of the theoretical VAT that would be […]

Tax Information Reporting United States
As Legal Sports Gambling Grows, So Does Growth in W-2G Reporting

With the NCAA basketball tournament approaching, the US is gearing up for its biggest gambling weeks of the year. And while most “March Madness” pools might technically be illegal, legitimate sports betting is sweeping the US following last year’s landmark Supreme Court decision allowing states to legalize sports gambling in casinos.   As legal sports […]

E-Invoicing Compliance EMEA Italy
Italy E-invoicing: Esterometro Reporting Requirements for Cross-border Transactions Updated

What is Esterometro? The Italian government’s e-invoicing mandate became effective on 1 January 2019.  While cross-border invoices are exempt, all domestic B2B and B2C invoices must be cleared through the SDI platform. This means that the Italian government and tax authority now have real-time access to the data of all B2B and B2C VAT transactions […]