Is Your Accounting Software Ready for 1099 Reporting?

tax seasonAs the year draws to a close, companies that employ contract workers or consultants are gearing up for annual 1099 reporting. Your accounting software can streamline the process and make your life easier, but if it doesn’t have the functionalities you need, it can also create additional headaches. If your software lacks flexibility, you may end up performing essential tasks manually or you may discover that the software won’t allow you to make changes as needed.

Accounting Software and the 1099

Problems often occur when your software isn’t flexible enough in terms of data input. It may not allow you to enter 1099 amounts after the invoice has been posted. It may allow only one type of 1099 per vendor. Or it may not have a good way to import data from other sources.  If you’re in the market for new software, what capabilities should you look for in terms of 1099 reporting?

  • Differing Invoice Amounts—Some software systems will not allow you to record 1099 amounts that are different from corresponding invoice amounts. However, invoices often include extra fees like tax and shipping that should not be reported on the 1099. Look for a solution that can incorporate differing amounts based on your records.
  • Late Entry—Mistakes can happen as 1099 information is recorded throughout the year. Your software should be able to incorporate changes and entries that need to be made after invoices have been sent.
  • Multiple Form Types—At times, you may need to record more than one 1099 form type for a particular vendor. Look for software that can accommodate multiple forms and multiple amounts.
  • Data Import—Can the software easily import data from other sources? Look for flexibility in source data as well as the ability to easily make changes.
  • Form Generation—When you’re ready to file, your software should be able to generate and print the needed forms or prepare files for e-filing.

Integrated Systems Vs. Add-On Modules

If you’re ready to upgrade your accounting software, look for an integrated system that incorporates all of the functions you need, including 1099 reporting. Integrated systems may initially cost more than an add-on module, but they will usually end up saving you money on maintenance fees and upgrades over the long term. However, if you aren’t ready to purchase a new system, add-on modules can increase the effectiveness of your software and reduce your workload as you prepare for tax season.

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