Business Taxes: If Your Company Isn’t E-Filing This Year, What Are You Waiting For?

Post sponsored by efile4Biz

By Rick Roddis

If I told you that you could reduce your company’s tax errors by 19%, would you be interested? Well, that’s exactly what happens when you shift your tax reporting from paper to the cloud. When businesses use paper tax forms, there’s an average 20% error rate. When filing online, that number drops to just 1%. It’s a no-brainer.

For that reason—and many more—employers are switching from time-consuming, traditional paper filing to streamlined, modern W-2 and 1099 cloud processing. In fact, electronic filing is fast becoming the preferred choice for small businesses.

But what exactly is it?

Electronic filing, or e-filing, is the online transmission of required tax information (such as 1099s and W-2s) directly to the Internal Revenue Service (IRS) or Social Security Administration (SSA), rather than completing and submitting traditional paper tax forms.

Over the past several years, the demand for paper tax forms has declined, while electronic filing continues to grow. Businesses are looking for the smartest alternative—and e-filing is it. Let’s examine the reasons for this shift.

3 cloud processing benefits

E-filing is a popular method for filing 1099s, W-2s, and other business tax forms because everything is done online, eliminating the need for paper forms or software.

Specifically, people prefer e-filing because it is:

• Accurate. In addition to the numerous prompts that ensure compliance with the latest tax rules, e-file sites do the complicated calculations. Data entry errors are caught and mistakes are prevented. That’s why the IRS considers e-file returns to be virtually error-proof.
• Convenient. Instead of installing software or handling mountains of paperwork, you simply follow a few easy prompts from your desktop. No more struggling with paper jams and misaligned forms in printers. And say goodbye to last-minute trips to the office supply store and post office.
• Helpful. Online filers appreciate the regular communication during the e-file process, including email notifications when the IRS and/or SSA receives filings. Plus, you can check the status of a specific filing any time from any computer, laptop, or tablet.

What about recipient copies?

E-filing does not eliminate the need for paper completely. Recipients (i.e., independent contractors and employees) still must receive a paper copy of the W-2 or 1099, or opt in to receive an electronic version.

This means e-filing with government agencies is only part of the process. The other is printing and mailing copies to recipients, a labor-intensive task that many businesses struggle with, especially since it occurs at the beginning of the year, a traditionally hectic time for employers. Fortunately, the right provider will recognize these demands and offer an all-inclusive print, mail, and e-file service.

3 outsourcing advantages

Many businesses choosing to e-file will seek a provider that can also print and mail recipient copies. Using a full-service partner is appealing because:

1. It saves you money. When considering the dollars and cents impact of paper filing, don’t neglect to include labor costs. Online filers who select an all-in-one tax reporting partner save on payroll associated with having an employee manually print and mail forms.
2. It saves you time. The data is entered or uploaded online and then the provider handles the rest. The time that you and your staff save can be put to better use in growing the business.
3. It gives you security. Printing forms like W-2s on the office printer and having employees handle mailing isn’t the most secure or confidential process, especially when you consider these documents contain sensitive information like annual salary and Social Security numbers. Mismatching forms and envelopes is a concern, too. Imagine what would happen if an employee received a coworker’s W-2. Outsourcing to a specialized and reputable provider can give employers valuable peace of mind.

Security makes the difference

Security is of critical importance when filing taxes electronically. There are several factors you should consider when choosing an e-file provider for cloud processing. First and foremost, you need to verify they are an IRS-authorized e-file provider.

To obtain this “stamp of approval” from the IRS, a tax-reporting business must go through a rigorous three-step process:

Step 1: Create an IRS e-services account. Before a business can submit an e-file application, it must create an IRS account, which allows electronic interaction with the IRS. In addition to providing specific identification details (Social Security number and phone number), the person creating this initial account must make sure every principal and responsible staffer in the business signs up for e-services. This point person also must confirm registration within 28 days of receiving an IRS confirmation code in the mail.

Step 2: Submit an e-file application. A business can begin the application once all essential people are approved for e-services. Because the application is so comprehensive, it can take up to 45 days for the IRS to approve it. As stated on the IRS website:

“The application process is not simple, but as a tax professional, you understand these steps are necessary to protect the integrity and security of the electronic filing system. We all have a stake in maintaining the highest standards for e-file providers.”

Step 3: Pass a suitability check. Once the business has submitted an application and related documents, the IRS can conduct a suitability check on the organization and each person listed on the application as either a principal or responsible employer. This may include a credit check, tax compliance check, criminal background check, and/or a check for prior noncompliance with IRS e-file requirements.

Upon this approval, the business gets an acceptance letter from the IRS with its Electronic Filing Identification Number, or EFIN. Now enrolled, the business can offer e-filing.

Handling sensitive data

It is also important that you know how the business handles sensitive data. Due to the ever-present threat of data breaches and other security threats, an e-file provider needs to offer the strongest data encryption possible.

Only with end-to-end data encryption recommended by the federal government can a provider effectively block the interception or interruption of information by a third party. Data should be encrypted as soon as it’s entered on the website, and stay encrypted throughout the entire process.

It’s important to note that the IRS doesn’t regulate how recipient data is handled. Instead, it’s entirely up to the service provider.

Security with print and mail

For cloud processing, data transmission is just the first step that requires the necessary protection. Printing and mailing recipient copies is the next step. For this, you’ll want to ensure the company has achieved Service Organization Control (SOC) certification. This special certification by the American Institute of Certified Public Accountants (AICPA) means that every step of the e-filer’s process has been thoroughly examined and approved to guarantee security.

Specifically, the AICPA examines these areas:

• Security. The entire system is protected against unauthorized access.
• Availability. The system is functional and operates correctly.
• Processing integrity. Data processing is complete and accurate.
• Confidentiality. All sensitive information is protected.
• Privacy. Personal information is collected, used, retained, and disclosed in accordance with the AICPA’s privacy principles.

The certification process is costly and time consuming, but in the end it is key indicator of a quality provider.

Ready to make the leap?

One of the nation’s leading e-filing providers, efile4Biz.com is IRS authorized and SOC-certified. And that’s important because you need to be confident your confidential data will remain confidential. Save valuable time this tax filing season. Creating an account is free, and it’s the first step to experiencing all the advantages of e-filing.

About the Author

Post by Rick Roddis

Rick Roddis is president of ComplyRight Distribution Services, a division of ComplyRight, Inc., a provider of cutting-edge compliance products and programs for businesses. Rick’s career began as an insurance underwriter and advanced into sales, operations, and management roles at different companies that partnered with Intuit, Staples, Office Depot, and others. In 2008, he became president of TFP Data Systems, the leading manufacturer of 1099, W-2, and ACA tax forms, envelopes, and software. Over the past four years, he’s focused on transforming ComplyRight Distribution Services from a traditional forms manufacturer to a digital provider of tax solutions for businesses through services like eFile4Biz.com

Company: ComplyRight Distribution Services
Website: www.efile4Biz.com
Connect with me on Facebook, Twitter, and LinkedIn.

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