Tax Forms Supplier Asks IRS to Give Small Businesses a Break

Comment regarding:
Electronic Filing Requirements for Specified Returns and Other Documents.

26CFR parts: 1, 53, 54 and 301

[REG-102951-16].
RIN 1545-BN36

Topline

While we support ongoing simplification of informational return filing for operational efficiency, we believe the timing of any change should be moved off one filing season and the minimums required be raised from 10 to 100.

Background

We help thousands of tax firms and businesses each year serve their clients and comply to the ever changing, late breaking tax rules. We sell both paper forms and e-file options to help professionals file informational tax returns. As such we are in a unique position to hear from and understand the impact of rule changes as proposed by IRS xxxxxxxxxxx.

It is tough out there

Product is already being distributed. Planning for demand of printed forms begins long before a season starts. Professionals are already ordering their forms and we are already shipping them for the 2021 filing season. They do this early, because they need time to spin on a dime as late-breaking changes are made. Delaying a year will provide ample time for adjusting inventories AND helping communicate the change to the public.

Late changes are killing the professional. The 2020 tax filing season was the worst experience for professionals in decades, if not ever. Late breaking tax laws created havoc within the IRS, and it flows downhill to software providers, tax professionals, businesses and households. The professional community are now strong believers that both Congress and Treasury have lost their minds and lack empathy on the hardships late changes make on everyone in the country that are trying like heck to simply follow the rules.

We need the time to help communicate the change. The NEC change had proper lead time, but in our experience, was poorly communicated by the IRS. Thankfully, with the one plus year lead-time we were able to send out emails, create videos explaining the change and talked to professionals and small businesses that appeared to order 1099-MISC instead of 1099-NECs. Making a change now eliminates our ability to effectively help you communicate this change.

Software updates are problematic. Congress and Treasury have a terrible habit of making late breaking changes and then dropping the changes on software companies that then must scramble to comply. Your current proposal requiring using the same filing method for corrections is just another such example. It will be tough to adjust logic in systems and will be impossible to enforce. Should not the focus be on correctly reporting the information instead of regulations on HOW you must report it?

Consider small business owner Jill. She needs to file a corrected 1099-NEC. She files it with a paper form, but it is eventually rejected by the IRS because it is not e-filed like the original form. So gets a reject notice (we hope) from the IRS. Then she tries to file it in a software program . . . the software program rejects it because the original form was not submitted in that program, but in another one. . . . Jill is now totally frustrated, does not have the corrected return filed AND ALL SHE WAS TRYING TO DO WAS TO BE COMPLIANT. . . . The IRS' unintended message to Jill . . . don't correct your form, it is too frustrating and almost impossible to do.

Lacks empathy. The tone of changes from on high continues its move from voluntary compliance into a punitive system. The low e-file form threshold in the proposed regulations lacks understanding or empathy for the small business person in America. Do it this way . . . or else! By moving the e-file limit from a combined 10 to 100 will allow the market to decide the best way to file the form instead of having it dictated to them. In our experience, your e-file goals will be met without the need to REQUIRE the e-filing at 10. In other words, e-file will happen WITHOUT taking such a heavy-handed approach. We are seeing it happening already . . . without being draconian about it.

To summarize

In summary we are fully supportive of the reduction of forms from 200 to 100, but strongly recommend moving the change out one year. We think the move to 10 forms is unnecessary and lacks empathy for the challenges facing small businesses. It should be 100 to allow small businesses flexibility. Finally, we believe the operational drive for this change appears to be the tail wagging the dog, never a good message to the citizens of the United States (the dog!) that are trying like heck to be compliant within the rules (the tail) . . . that keep changing.

From,
Tenenz, Inc.
Bloomington, MN