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

Clark Sells
July 24, 2018

This blog was last updated on March 11, 2019

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.

Author

Clark Sells

Share this post

North America Unclaimed Property
February 10, 2025
Delaware Announces 2025 VDA Invitation Dates

This blog was last updated on February 10, 2025 Mark your calendars – April 11, 2025 and August 15, 2025 are this year’s anticipated release dates for the Delaware’s Secretary of State (SOS) VDA program invitations. In the event that an organization receives an invitation to participate in the Voluntary Disclosure Agreement (VDA) program  , […]

North America Sales & Use Tax
February 6, 2025
The Tariff and Sales Tax Mishmash – Untying the Mess

This blog was last updated on February 12, 2025 Talk of tariffs dominates the current news cycle with some commentators suggesting that tariffs will spell disaster for our economy while others say the exact opposite. We’ve seen the stock market sometimes fluctuate as tariffs are announced but later suspended, leaving us to wonder whether an […]

retailer dtc wine shipping
North America ShipCompliant
February 6, 2025
Retailer DtC Wine Shipping: The Time Has Come

This blog was last updated on February 6, 2025 By Tom Wark, Executive Director, National Association of Wine Retailers We are often reminded by the media and those in the wine industry—as well as by wine enthusiasts—that the three-tier system of alcohol distribution in most states hinders consumer access to the expansive number of wines […]

Montana 1099-DA
North America Tax Information Reporting
February 5, 2025
State Filing Alert: Montana’s New 1099-DA Requirements for Crypto Brokers

This blog was last updated on February 5, 2025 Reporting digital asset transactions on Form 1099-DA just got a little more complicated. For 2025 transactions, crypto brokers that file Form 1099-DA with the IRS will be required to file the 1099-DA with the State of Montana. This makes Montana the first state to introduce a […]

North America ShipCompliant
January 23, 2025
DtC Wine Shipping in 2024: A Year-in-Review

This blog was last updated on January 28, 2025 The direct-to-consumer (DtC) wine shipping channel faced a storm of challenges in 2024, navigating some of the toughest market conditions in over a decade. As inflation tightened wallets and consumer behaviors shifted, the industry recorded its steepest declines in shipment volume and value since the inception […]