Note: This blog first appeared in AccountingWEB.
A lot of people assume April is the most stressful time to be an accountant. But if you specialize in accounting for small- to medium-sized businesses, January can be just as bad.
Come January, your clients have barely closed their books for the year, and they have to scramble to distribute their 1099 forms by the end-of-month deadline. And if your clients are scrambling, that means you're scrambling.
Here's a trio of tips to help you protect your sanity when filing that flurry of 1099s.
1. Get Clients to Focus on 1099s All Year Long
The 1099 season was bad enough when clients had a cushion between the filing deadline for distributing 1099s to vendors and the filing deadline for the IRS. Starting in 2016, though, employers had to submit 1099s for "non-employee compensation" (a.k.a. "box 7") not only to their independent contractors but also to the IRS by the same deadline, January 31. That's eliminated any margin for error.
It's not too much to ask. No accountant can perform the job adequately without the necessary records.
2. Start Early
Do a preliminary review in December to ensure you have W-9s on file for everyone who requires one, that all payments are properly posted, etc. That will make life easier for both you and your clients when it's 1099 crunch time in January.
When it comes to vendors who work on a temporary or seasonal basis, clients can get started early. Say a client hires an independent contractor to do some seasonal work every summer. The contractor starts the work in June and finishes in September. There's no reason the client needs to wait until January to verify that the contractor's 1099 information is accurate.
3. Use the Cloud
Keeping track of 1099s isn't the only reason to get your clients into the cloud, but it's one of the most persuasive. Using the proper online collaboration tools, you can make your clients' 1099 filing a paperless process. And while you're at it, you should use the cloud for W-9s as well. It's much more secure than snail-mailing a paper W-9, faxing it or using email (the least secure option).
You shouldn't stop there, of course. As you move your clients' bookkeeping to the cloud, you should work with each one to find an integrated combination of collaborative tools that suits their specific field — e.g. job-costing software synched with QuickBooks Online for the construction industry.
But let's get back to 1099s for a minute. Among the many advantages of filing electronically is that correcting mistakes is much simpler and less time-consuming. You also have an online backup, which means your clients never have to worry about losing or misfiling a form. (It's easy for them to access records from previous years, too.) In addition, the system is both sharable and scalable. Plus, e-filing 1099s eliminates the need to file 1096 and W-3 forms.
Finally, electronic filing will save your clients more than one kind of paper. Case in point: The first year we switched to Track1099, an e-filing collaboration tool, we saved the average client 37% compared with the previous year. That should help even old-school clients warm up to the idea of electronic 1099 filing.While it may be too late to act on tip #1, there's still time this year to do a thorough review of W-9s on hand and to electronically file 1099s. And if you can stick to this game plan for all of 2018, your 1099-related workload next year will seem less like a blizzard and more like a light dusting.