Tax Statement Processing and Software for Businesses

IRS document processing is one of the areas that few business people prefer to handle without expert assistance. Nonetheless, it is an activity that must be performed to avoid substantial IRS penalties. Subcontractors and independent contractors must be provided 1099 statements, investors must be provided dividend statements and employees must be provided W-2 forms.

The information on these forms must not only be given to the applicable third party, it must also be reported to the IRS. The information reported must be timely, accurate and correctly formatted. Failing to do so can be the cause of IRS penalties and needless additional work with corrected forms.

Though most businesses know they must report this type of financial information to the IRS and provide it to third parties, the problem most often comes in is how to report the information and what to disclose. A small business doesn’t normally have a tax department and the rules can be cumbersome to learn and take many man hours to process. In addition, many businesses are worried about improper release of confidential information such as social security numbers or income information.

Tax statement outsourcing has become a popular method of processing and sending tax statements to those required to receive them. With outsourcing, a business will retain a third party company to process the documents. The business provides essential information to the processing company. Documents are then prepared and sent to the IRS and the third parties.

Another method becoming increasingly popular is providing tax statement software to a business to allow the business to complete the processing on its own, or provide as much of the work as possible. Tax statement software, such as found at Lanvera.com, is a type of software available for this purpose. Normally, the tax statement software company will provide extensive support to the business and will provide a user friendly interface for document preparation. The business will have control of the document during the processing phase of statement preparation.

Fees can usually be set up on a cafeteria basis, with the business paying for only the services it uses. If the business utilizes software provided and creates its own documents from it, fees will be substantially less than a full service document preparation. The final decision will come down to what a business is comfortable in completing on its own and a weighing of costs and benefits of each method.