Financial services companies are now forced to tackle a new breed of 1099 reporting requirements for corporate clients. Federal and state governments are increasing audit frequency and requiring more detailed data, and new rules are putting companies’ reputations on the line.
Tax leaders at financial services companies have bigger burdens on their shoulders these days, but they also have the opportunity to create value while keeping clients in compliance. There’s a new job description for tax leaders managing 1099 reporting processes, and it’s increasingly strategic and innovative.
Then and Now: Ensuring Accuracy with More Frequent Corrections
The IRS is addressing corporate 1099 reporting errors more strategically and requiring corrections more often. Companies are now facing greater risk and harsher penalties – causing banks and financial institutions to ensure complete and accurate compliance if they want to avoid losing clients.
Old role: The tax leader was charged with keeping sensitive client information secure but still accessible for 1099 reporting teams. As the IRS began to require more detailed information and increase corrections frequency using digital processes, the tax leader was often tasked to optimize complicated, time-consuming processes.
New role: By centralizing tons of historical and granular financial data, the tax leader empowers 1099 reporting teams to improve accuracy and avoid data-gathering hurdles. Financial services companies can then gain added efficiency while upholding valuable client relationships.
Then and Now: Understanding New Rules and Differentiated Requirements
The IRS as well as many state departments of revenue are becoming more stringent in corporate tax credit processes. Tax authorities in the US are trying new approaches to earn tax revenue – and putting corporations under a magnifying glass.
Old role: The tax leader was required to know the rule changes and monitor the IRS’s latest requirements within enough time to prepare 1099 reporting teams for tax season. For regional banks growing their footprints, a lot of weight was placed on the tax leader’s shoulders to ensure corporate clients’ reporting obligations were accurately fulfilled.
New role: A knowledgeable database automatically updated with the latest requirements from the IRS and state departments of revenue now enables the tax leader to proactively managing internal teams. As 1099 reporting requirements shift to a year-round process, the tax leader now leverages this expertise to streamline processes internally and for corporate clients.
Then and Now: Safeguarding Clients and Employees from Compliance Burdens
The IRS is getting better at exposing reporting errors, punishing repeat offenders and aggressively updating deadlines. Internal teams charged with managing 1099 compliance tasks are struggling to keep up with heavier workloads.
Old role: As 1099 burdens compounded significantly, the tax leader was responsible for figuring out how staff could manage sudden surges in work in a cost-effective way. Client reputation stayed top of mind while the tax leader had to ensure reporting obligations were fulfilled appropriately – without placing costly burdens on the organization.
New role: Now an external and internal 1099 reporting ally, the tax leader creates efficiency to avoid placing heavier burdens on employees. The tax leader is confident in maintaining the organization’s reputation, knowing clients’ mailings and filings are fulfilled on-time. And the best part? The tax leader fulfills both of these needs without having to hire additional staff.
The tax leader and 1099 reporting professionals transforming their compliance challenges into more cost-effective processes will also take on a variety of new roles that will involve elevating their company’s reputation among new and existing clients.
New “Hats” for the Head of Tax Professional to Wear:
The Expert: A source on reporting requirements for individual jurisdictions with the ability to keep reporting teams proactive, avoid organizational deficiencies and uphold the company’s valuable reputation.
Operational Hero: A leader who values internal team satisfaction, ensuring complex reporting burdens are managed efficiently without investing in costly resources to support heavier workflows.
The Software Champion: An innovator who keeps the organization up to speed with technology-enabled efficiencies like data centralization and automation to avoid risks and manage 1099 reporting year-round.
A Corporate Ally: The protective guard over clients’ financial information who uses automation and advanced technology to manage sensitive data securely as corporate clients are increasingly scrutinized by tax authorities.
The Risk Averter: An organizational gatekeeper with a record of keeping clients in complete compliance with reporting requirements, while avoiding any risk of negatively impacting their own business reputation from missed deadlines or mismanaging client information.
The tax information reporting landscape is more challenging than ever for financial services companies. Maintaining compliance with evolving 1099 rules to avoid losing clients while also staying cost efficient in the midst of time-consuming compliance obligations can be frustrating. The financial services industry now has the opportunity to elevate the tax leader role to transform new challenges into value-added opportunities – and become a hero for both clients and staff.
Download our State of Regulatory Compliance eBook to learn how leading financial institutions are navigating complex 1099 reporting initiatives, and contact us to take the first step in eliminating your company’s compliance burdens.