UPDATED: I recently received a comment on my recent article about giving a 1099-MISC to your attorney that got me thinking about benefits of filing 1099 forms (and other tax forms) electronically. (The 1099-MISC form is the one you must give to independent contractors and businesses you have paid.)
1. More time to file. I was reminded that that 1099s filed online have a later filing deadline. The filing deadline for 1099-MISC forms (along with transmittal 1096 forms) is February 28. But you have until April 2 to file these forms if you file online.
2. Easier to file. Of course, it's almost always easier to file tax forms online, but the IRS's online filing is something of a chore. To file electronically with the IRS, you must sign up for their FIRE (Filing Information Returns Electronically) system and submit documents in a specific format. And there is no online form completion option with FIRE. Sounds almost as painful as paper forms. Another way online filing is easier is that state and federal is filed in one filing and the user sends the recipients copies from the filing.
3. Required for larger companies. If you have 250 or more information returns (like 1099s) to file, you must do the filing electronically. The requirement is met separately for each form.
4. No need to send Form 1096. Online filing eliminates the need to complete Form 1096, which includes totals from all 1099s of each type. If you don't file online, you must complete a Form 1096 for each type of 1099 (1099-MISC, 1099-B, 1099-DIV, etc.)
5. Less expensive than some other options. My bookkeeper said he used to pay $10 to $12 for a package of 25 forms from an office supply store to prepare just 2-3 1099-MISC forms and a 1096. With the online service he checked, one to ten forms per filing is priced at $3.49. (Prices may vary.)
My bookkeeper tried one of the online filing companies for the couple of 1099-MISC forms I need to prepare. The company took our money and said they filed the forms, but we received no information, and were not able to contact them to find out what was going on. Proceed with caution if you use one of these companies.
Reminder: 1099-MISC forms must be send to independent contractors and business you pay by check/cash, by January 31.
More about Filing 1099-MISC forms for 2011 taxes.
What's the Difference Between E-file vs. EFTPS?
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