ATLANTA, GA (February 18, 2020) – Your teammates in Finance are finally getting a good night’s sleep, now that the Jan 31 deadline for sending out 1099 tax summaries has passed. The 1099 Torment is indeed a thing. Symptoms of this common illness include: extreme irritability in Accounts Payable, phone lines jammed with contractors inquiring about their annual tax summaries, and nightmares about mounting IRS penalties. If you saw or experienced any of these symptoms last month, it’s time to outsource your 1099 tax summary execution.
Countless service providers in the marketplace claim to be Your! Best! Solution! for 1099 outsourcing. What benchmarks should you consider as you assess the players on the field? The strongest outsourcing solutions will offer two key attributes: automation and integration. Most providers will specialize in one over the other, but your best option will go deep on both. Here’s a deeper look at each of these attributes.
The best outsourcing solutions
will have two key attributes:
automation and integration.
The spectrum of automation ranges from minimal to comprehensive. At the most fundamental level, 1099 processors take contractor data collected by your company (typically in the form of an Excel file), drop it into the 1099 Form, and return the completed hard copies to you for mailing. Providers offering additional automation can relieve you of the effort of folding, stuffing, and mailing. A provider with more robust automation will involve the initial capture of contractor data in a digital W9 form. Two key components of automation are real-time TIN check (which occurs as soon as the TIN is entered by the contractor) and annual TIN check, both of which are crucial safeguards against IRS penalties.
Perhaps the most valuable aspect of automation is when a service provider files your 1099s with the IRS on behalf of your company. The process of filing with the IRS is notoriously tedious (and hugely expensive if neglected or done improperly), making it among the most welcome of burdens lifted by a third-party provider.
If automation is an amusement park, integration is the park’s front entrance, and no amount of thrilling rides will get park visitors through a locked gate. For instance, many providers offer a cloud-based portal where your contractors login to complete a digital W9. The portal is unlikely to match your company’s branding, prompting an unaligned experience for your contractors. What’s worse, providing critical data to unknown third parties via the internet is quickly becoming an increasingly dubious practice.
At a minimum, an integrated solution ‘looks’ like your company, with your company logo featured prominently in the payee portal – and in the portal’s URL. The most robust – and most secure – level of integration involves API connectivity, with the components of automation mentioned above fully embedded in your company’s existing ERP or HR platform, neatly wrapped in your branding, and working seamlessly with your financial solution of record.
A new breed of companies like KyckGlobal offer the next step in integration: the ability to actually make payments to your contractors from the exact same platform that manages your digital W9s and 1099 generation. Contractors can choose from today’s most popular payment types, all of which are available from a single point of reconciliation.
Finding What’s Best for Your Company
Finding the best fit for your company’s 1099 outsourcing requires a clear-eyed understanding of how much automation and integration you want. SMBs with just a handful of contractors may be ready to simply ship out their CSV files, while larger firms will include data collection on the front end with a digital W9 to minimize the risk of IRS penalties, and deliver 1099s in both digital and hard copy formats. Enterprise-level companies will seek an end-to-end solution with annual TIN checks and editable digital 1099s. Whatever you decide, February is an ideal time for making your choice so that you can start capturing data in the new process – and make January 2021 your most peaceful month on record.
KyckGlobal helps businesses streamline outgoing payments with a next-generation cloud-based platform that delivers a robust array of the most popular payment types – all with a single point of reconciliation. The KyckGlobal solution automates IRS compliance, promotes worker loyalty, and provides access to new customer pools. Founded in 2018 by fintech executives and entrepreneurs, KyckGlobal is headquartered in Atlanta. For more information, visit www.kyckglobal.com and @KyckGlobal.