This post is by Bruce Senti of Aatrix State and Fed Payroll Reports

Compliance will be the BIG topic for 2013.

As the recent political environment has shown, the idea that tax policy will change little in 2013 is laughable. The federal government will continue to struggle with necessary change and no one knows exactly what direction tax code and legislation will go.

What we do know is that with the implementation of universal health care and ever-growing deficits, every taxing authority is likely to be impacted.

The reporting of tax liabilities to multiple state and federal agencies is one of the most onerous and scary requirements of having employees.

Over 25% of businesses experience a penalty for errors, late filings, or other mistakes filing employment tax, averaging over $700 each year.
(Source: IRS data book 2010)

Large companies may make deposits and file reports several times a week. That’s hundreds of filings in multiple states each year. Automating this process provides significant savings.

No matter what size the company, compliance to eFiling requirements, ever-changing forms, and meeting new guidelines legislated into existence during the year is difficult, and opens you to significant fines and penalties for non-compliance.

Moving to eFiling

Any change in the way your business operates should be made for the purpose of improving efficiencies, lowering expenses, limiting liabilities, or to keep up with changing requirements in regulations or marketplace.

Changing payroll reporting and payments to eFiling meets many, if not all, of these reasons. The simple interface and comprehensive nature of many of the forms and payments solutions available, provide efficiencies to virtually any other reporting and payment options. Automated error-checking functions eliminate virtually all rejections, as well as eliminating the liabilities associated with potential fines and penalties. One of the biggest changes in the business regulation environment is the stated goal of the IRS and SSA to make all communications and business practices to be conducted electronically.

Since many states take their lead from the federal standards, it will not be long before virtually all state and federal payments will be required to be sent electronically.

The Problem

Moving to electronic payments is inevitable. The question is how to go about changing over from your current process to electronic delivery.

With over 170 state and federal taxing agencies and myriad different processes, formats, forms, and deadlines, many businesses have just thrown up their hands and outsourced reporting to payroll services and paid very significant fees to do so. In many cases they simply felt they had no choice. The threat of non-compliance is just too scary.

Other companies have hired additional staff and decided to use agency websites to process payments and reports. Again the business is faced with going to several different sites, none of which have the same process. Those businesses are faced with unique logins for each site, separate tracking methods for each site, and multiple contacts to try to resolve any issues that may occur while transcribing in payroll data or attempting to export/download multiple files for the various sites.

The Solution

Find a solution that is integrated in your payroll module and does not require transcribing information, creating exported files, or transcribing to a website. The solution should provide automated payroll reports that are filled in automatically with your payroll data and can be eFiled with just a few clicks. The interface should be intuitive and simple to understand. A replica of the actual form displayed onscreen and the review process very simple. The steps required to eFile should be few and well defined.

The solution should support all of the federal and state agencies you file with and include unemployment, wage withholding, and new hire reports and payments.

There should be a single login to eFile and view all filing histories. Any filing should be time-stamped and dated to provide an audit trail.

There should be a calendar system that provides reminders for filing deadlines that could be received via email, desktop alerts, or even text messages to your cellular devices.

Compliance guarantees should be part of the service. All negotiations with state and federal agencies concerning filings should be conducted by representatives of the service. Any fines or penalties incurred because of service errors should be paid by the service.

Finally it needs to be affordable. An annual subscription that includes all of your filings for twelve months should be based on how many employees you have and should be less than outsourcing to a payroll service.

Processing W-2s is one of the most important and burdensome requirements businesses face every year. It is the time of year many payroll administrators dread for obvious reasons.

Making a mistake on an employee’s W-2 not only puts the business at risk of costly fines and penalties, but also creates a great deal of extra work to fix.

In addition to the liability issues when processing W-2s there is also the matter of effort needed to print forms, preparing them for mailing, and the costs incurred completing the whole process.

Complete W-2 eFiling services can eliminate most of the pain associated with processing W-2s in-house. In the past, these services were provided by payroll service providers and were often very expensive. The addition of complete eFile services to many payroll software solutions, has made this option very affordable, and offers significant efficiencies to small businesses.

What to look for in an eFile solution.

When determining whether a complete W-2 eFile solution is the right choice for your business, there are several features to look for.

1. The solution should be native to your payroll solution and automatically convey your payroll data directly from your payroll entries. Manual entry of your payroll data opens the door to transcription errors and lost time trying to locate and fix errors.
2. solution should include automated error checking that complies at minimum the standards set by Accuwage and eVerify.
3. It should provide the ability to save a history file of each filing and the ability to print file copies if desired.
4. It should include all filings required: Federal copies and State copies including the Federal W-3 and any state reconciliation forms required.
5. It should automatically print and mail employee copies directly to your employees
6. It should also host employee copies to a password-protected website so terminated employees who have change addresses can access their copy and print it as needed.

Additional features to look for.

Outside of the minimum requirements listed above there are several other features that provide benefits and efficiencies.

1. It should provide the ability to schedule when your employee copies are mailed, when your Federal filings are made, when your State copies are filed, and the ability to make corrections at no charge up until the filings are made. Often times when the employees receive their W-2s they recognize a change that needs to be made. The ability to file a corrected Federal and State filing prior to their submission date will save the need for W-2 Cs or other additional forms.
2. It should allow you to review all employee data in a spreadsheet format, which allows easy editing, and the simple entry of additional information required such as third party healthcare.
3. It should include forms for all states that require W-2s and all US territories.
4. You should be able to find testimonial evidence from customers who have used the solution with your native payroll solution.
5. The solution should have at least 3 years of history in providing this solution to assure that the solution is a mature and well-tested product.

Cost.

Finally, the service must be affordable. Typical in-house cost of processing W-2s is from $3.85 to $4.35 per employee. This cost includes processing time, forms, envelopes, and postage.

A fair price for a complete service solution should be below the lower limit of in-house costs.

This post is by Bruce Senti of Aatrix State and Fed Payroll Reports

State and Federal eFiling requirements are mandating more businesses to eFile payroll reports and payments every year.

More than a dozen states either lowered the threshold for employee count requirements or outright mandated that businesses eFile wage withholding, unemployment, and new hire reports.

The federal government requires virtually all employers to make withholding payments electronically.

The efficiencies provided government agencies by requiring eFiling will continue the trend towards requiring business to file reports and payments electronically.

Electronic tax administration is the foundation for a modernized IRS that provides secure, convenient, timely and accurate services to taxpayers, and to the tax professionals and IRS employees who serve them. (IRSOB-E report 2010 page 9)

The full vision for a modern ETA environment goes beyond just e-filing and seeks to make electronic interactions among taxpayers, tax practitioners, and the IRS the norm. These electronic interactions include the entire range of pre-filing, filing, and post-filing tax activities which taxpayers and their representatives may engage in with the IRS, including the ability to resolve taxpayer account issues over the Internet. (IRSOB-E report 2010 page 9)

The Board emphasizes the need to substantially increase the e-file rate, particularly among businesses filing employment tax returns, because it is crucial to the IRS to achieve the strategic 80 percent electronic filing goal. ( IRSOB-E report 2010 page 39)

“It’s good news for taxpayers as well, whether they be commercial or private filers, most experts agree, businesses that utilize e-filing have a 99 percent accuracy rate,” said David Deeter of Frazier & Deeter LLC.
Source: E-filing Hits Record High | Atlanta Business Chronicle

It is clear that the movement towards electronic filing is more than a trend. It is inevitable that virtually all reporting to taxing authorities will be electronic.

What to look for when choosing an eFiling solution.

With more and more agencies providing an eFile portal online which allows businesses to file reports electronically for free, you may wonder why would an efiling solution have any appeal.

You should look for a solution that has dramatic advantages over the use of the agency sites.

Simplicity

• The interface is very simple. Choose any form from one screen, review/edit onscreen, and simple steps to eFile
• One administrative account to track all confirmations, filings, and payments

Efficient

• eFiling is completed within the payroll solution without additional exports, typing, and logging into multiple sites
• Reports are filled in automatically with no need for manually transcribing
• Reports are time-stamped and saved on your machine and accessible anytime for review or audit

Accurate

• Reports are completed using the data within the payroll solution you use
• The solution must guarantee compliance with all legislation, eFile requirements, and form changes.

Affordable

• The solution should be offered as a subscription service which covers all your filing requirements for a single price. It should include all state and federal agencies you file with.
• It should offer a W-2 eFiling service which allows you to complete all filings as well as employee distribution for less than $4 per employee (the average in-house cost).

eFiling More Than a Trend...

Electronic filing is not going away. In fact, it is the future for virtually all business activity. State and federal agencies are being legislatively and budgetary driven to take advantage of the efficiencies and cost savings eFiling affords them. Take great care in choosing a solution that meets all your needs and has the ability to grow and meet your future needs.