New numbers suggest the PATH Act deadline for filing W-2 and 1099-MISC forms is continuing to cause havoc for employers.
The PATH Act, enacted in late 2015, moved the filing deadline from March 31 to Jan. 31. Filers are struggling to meet the new deadline and avoid financial penalties, which are attached to both late filings and corrections.
Late Filings and Corrections Both Increase Sharply
Earlier this month, an official from Social Security Administration told Tax Notes the number of W-2 forms filed late had already doubled year-over-year compared to TY2015—a shocking figure in early July, with the number of late-filed forms almost certain to grow. The SSA also told Tax Notes corrections were up 30 percent through early July compared to TY2015.
Originally put in place by the IRS as a mechanism for reducing risk in the reporting process, the Jan. 31 deadline is having the very consequences many tax observers feared it would. Working within a tighter timeframe, many filers are simply failing to file W-2 forms on time. Those who are filing on time often do so without having the luxury of checking their data’s accuracy, which has led to a large increase in the number of corrections.
W-2 Forms Aren’t the Only Source of Trouble
It’s not just filers of form W-2 who are struggling to file accurately and on time. The rising trend of late and corrected filings is as visible in 1099-MISC reporting as it is for W-2s. Sovos has observed strong parallels between filings of the two form types, suggesting the problem for filers is not isolated to one set of forms.
Clearly, the advanced deadline has companies scrambling to get forms in on time and steer clear of financial penalties. One conclusion to draw is organizations relying on existing in-house systems and processes for filing can no longer trust those systems to get the job done with the new deadline in place. Tax professionals and their colleagues in similar lines of business and IT need to rethink their filing processes and the systems they use to deliver transmittals.
Centralizing Tax Reporting Is Essential
New reporting demands call for cleaner, technology-driven processes with a centralized, multi-disciplinary team in the organization carrying out tax reporting and a system in place providing a single source of accurate data. Functional and technological silos that prevent communication among departments and slow the process of collecting and filing data are now a major liability and could lead to IRS penalties for late filing. Having a single team work within a single system in a streamlined filing process is essential.
As this year’s numbers demonstrate, there is little room for error in completing tax information reporting accurately and on deadline. The time to rethink processes and reevaluate systems is now—before reporting for TY17 turns into another debacle.
To learn more about the PATH Act and other 10-series reporting issues, sign up to attend the annual Sovos Global Compliance Summit. To get started getting your tax information reporting in order, learn more about Sovos’ 10-series reporting solutions..
About the Author
Scott Freedman is director of product strategy for AEOI solutions at Sovos Compliance. Scott has over 15 years of experience in strategic marketing and product strategy. He has worked for business-to-business software and SaaS solution companies like Thomson Reuters, and with Fortune 500 companies as a business consultant. Scott has a background in law and earned his JD and undergraduate degrees from the University of Chicago and University of Illinois.More Content by Scott Freedman