This blog was last updated on June 26, 2021
Now that the sting of winter tax season has passed, teams charged with tax information reporting obligations have returned to business as usual. With several months until next tax season, many companies take a vacation from 10-Series reporting processes during summer, but this traditionally seasonal process is ripe for a new approach.
The IRS recently updated its 10-Series regulations, leveraging digital tracking and processing to improve accuracy – ultimately increasing organizations’ risk exposure. Several of these changes are designed to reduce data manipulation and focus on high value accounts to increase revenue and crack down on fraudulent tax credit claims. Organizations impacted, therefore, have no room for error. The surge in technology adoption by the IRS has also shifted corrections management into a faster process to allow more corrections within a single form. Now, corrections can be addressed multiple times throughout the year, transforming the seasonal process into an on-going one.
Considering the increased exposure and volumes of information flowing with recent 1099 changes, we’ve asked our reporting experts to weigh in: Should tax information reporting really be on cruise control for the summer?
In short: No.
Organizations charged with reporting tax information to the IRS must innovate their current reporting processes to become more efficient or risk getting left behind with extra burdens and higher costs. In order to leverage 10-Series reporting updates to their advantage, organizations must proactively adapt their approach to meet IRS standards of on-going corrections.
For accurate compliance, the “summer off” mentality no longer works. These two key reporting practices which are being handled by technology include:
- Managing corrections faster reduces exposure associated with new penalties. From there, corrections could potentially increase 160% if they are not submitted within the first 30 days of filing – drastically increasing the penalty risk. Organizations can avoid the greater risks and unnecessary costs by simply managing corrections as they occur – rather than pushing them aside until winter.
- Processing IRS notices accurately reduce penalty exposure. Organizations that implement a multi-year process to manage IRS notices are more likely to avoid proposed penalties for inaccurate reporting.
While it is unclear what updates the IRS will roll out next, it is certain that technology is at the front and center of regulatory initiatives. Organizations that have adopted a tax information reporting solution that provides immediate access to critical data can accurately and easily manage corrections. With this intelligent compliance approach, employees can manage corrections year-round and stay prepared for what’s ahead – rather than reacting to spiked costs and penalties next season.
Take Action
Attend our webinar on June 27th, 2pm Eastern/1pm Central to learn:
- How leading companies are using technology to enhance corrections processes, improve data accuracy and reduce risk.
- Why a proactive timing approach allows organizations to reduce penalty costs and limit the amount of corrections required.
- How organizations can now take advantage of the De Minimis Errors rule under the PATH Act to minimize corrections.
- Best practices for increasing efficiency with 1099 obligations in the current state of compliance.
