It’s that time of year when people will start receiving 1099s and W-2s. I received one on January 4th, so the season really has begun.
If you’re an employer wanting to send a 1099 or W-2 electronically to the recipient … did you know that there are hoops you must jump through?
Providing paper copies to the recipient is always acceptable. This is true even if you’re required to e-file the 1099s or W-2s with the IRS.
Let’s talk about providing electronic copies of 1099s or W-2s to the recipient. This is where complications set in. Let’s look at the requirements.
You must obtain consent from the person you are sending to. According to “Form 1099 General Instructions for Certain Information Returns,” the “consent by the recipient must be made electronically and in such a way that shows that she or he can access the statement in the electronic format in which it will be furnished.” https://www.irs.gov/pub/irs-pdf/i1099gi.pdf
So, if you are sending a 1099 by email, get consent by email.
Disclosures Upon Delivery
You also need to provide a statement to the recipient with all of these things “prominently displayed.”
- If the recipient does not consent to receive the statement electronically, a paper copy will be provided.
- The scope and duration of the consent. For example, whether the consent applies to every year the statement is furnished or only for the statement for a particular year, as applicable, immediately following the date of the consent.
- How to obtain a paper copy after giving consent.
- How to withdraw the consent. The consent may be withdrawn at any time by furnishing the withdrawal in writing (electronically or on paper) to the person whose name appears on the statement. Also, confirmation of the withdrawal will be in writing (electronically or on paper).
- Notice of termination. The notice must state under what conditions the statements will no longer be furnished to the recipient.
- Procedures to update the recipient’s information.
- A description of the hardware and software required to access, print, and retain a statement, and a date the statement will no longer be available on the website.
Format, Posting and Notification
You must also:
- Ensure the electronic format contains all the required information and complies with the applicable revenue procedure for substitute statements to recipients in Pub. 1179.
- Post, on or before the due date, the applicable statement on a website accessible to the recipient through October 15 of that year.
- Inform the recipient, electronically or by mail, of the posting and how to access and print the statement.
The first bullet point is saying that the form must meet the prescribed format for what must be on 1099s. In most cases, you will meet this by simply using the PDFs from the IRS website, or using software to create the form. (NOTE: it’s okay to give copies to the contractor, of PDFs from the IRS website, but you cannot use these PDFs for filing with the IRS!).
The second and third bullet point relate to posting 1099s to a secure site. Which brings us to:
What Does it All Mean?
Can you simply e-mail a 1099 to a contractor? It happens all the time, but is it really right and proper with the requirements? If you obtain “consent,” which, since consent must be in the same format as the delivery method, would seem to simply be you e-mail them to ask if it’s okay, and they say yes.
Then, make sure to give them the long list of statements which tell them things such as they are entitled to a paper copy if they don’t want an electronic copy.
But should you be e-mailing 1099s?
It is allowable to “truncate” SSNs, where the format is XXX-XX-1234. Don’t ever e-mail a form with a full SSN on it.
However, there are problems with emailing, even if you truncate the SSN. You can do a read-receipt on the email but there may not be great tracking of delivery. And there’s always the issue of sending by accident to the wrong person.
Various platforms (and maybe your bookkeeping software) take care of these things. For example, I file 1099s through track1099.com. For e-delivery, I enter the recipient’s SSN. The platform then takes care of getting disclosures and sending notices, and there’s a secure link the recipient clicks on, and then they enter their SSN. This way, if I put the wrong email in, the recipient won’t be able to open the form because it requires the recipient to know their SSN and enter it.
Easier Just to Mail?
Is it easier to simply mail the 1099s? Unless you use a service that can jump through all these hoops, I think the answer is “probably.”
As always, don’t use this blog for making final decisions. Consider it “points to ponder.” Resources:
- Form 1099 General Instructions for Certain Information Returns: https://www.irs.gov/pub/irs-pdf/i1099gi.pdf (see page 17)
- Publication 1141 General Rules and Specifications for Substitute Forms W-2 and W-3. https://www.irs.gov/pub/irs-pdf/p1141.pdf (see pages 16 and 17)
(NOTE: this post is mainly about 1099s but the same rules apply to W-2s; see Publication 1141)