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With the deadline for filing 1099-NEC forms to all contractors by January 31, the beginning of the year can feel like a chaotic rush for many finance and accounting teams that work with contractors.
Every single freelancer, contractor, or consultant that earns more than $600 in a calendar year from your business requires a manual process that includes:
- Requesting a W-9 from the contractor
- Taxpayer Identification Number (TIN) verification
- Calculating the full payment total for each non-employee
- Double checking with the contractor if all information is accurate and/or chase down any missing information
- Filing a 1099-NEC form for each contractor with the IRS
With one or two freelancers, that’s a hassle. But with a hundred…that’s a nightmare.
Failure to provide an accurate 1099-NEC form to your contractors by the deadline may result in fines from the IRS—up to $330 per form. No pressure, right? That’s why many finance teams forgo these manual, chaotic processes and choose to outsource their 1099-NEC filing to other companies.
Should you outsource your 1099-NEC filing?
The alternative to running this process manually is to rely on outsourcing companies to save time and ensure compliance. That way, you can file your 1099s on time and keep your team on track with their day-to-day tasks.
But this comes at a hefty price.
We’ve spoken with financial leaders who report they spend $30,000 to $40,000 annually with vendors exclusively for 1099 processing.
But outsourcing doesn’t actually fix the issues that stem from a manual approach to tax filing for contractors. Because this approach is paired with W2 payroll software or traditional billpay tools that don’t have the information needed to expedite 1099 filing, your team has to look in multiple places for the information they need.
This patchwork setup means that even if you outsource the 1099 filing, someone still needs to:
- Find the documentation associated with a given contractor on Docusign
- Look up TINs manually on the IRS website
- Searching for the final payment amount in Quickbooks
- Work via email to confirm information from the contractor
- And then file a 1099 form either directly or through other payroll tools like Oracle or Gusto.
This means sinking a ton of time and manual effort into trying to make tools work for a process they weren’t built for, and hoping that in all of this exporting/importing, no mistakes get made. (And of course, this assumes that there’s no back-and-forth with any errors or missing information you need to chase down from the contractor, too.)
Outsourcing doesn’t necessarily streamline this process—you’ll still need to gather up all the information yourself before handing it over to another firm—and it’s not particularly cost-effective.
Should you automate your 1099-NEC filing?
An accounting and finance team is one of the hardest working teams at any company, no matter the size. With so many regular to-dos (plus higher-level strategic work for the start of the year), it doesn’t make sense to spend an entire month preparing 1099-NEC forms. But it also might not work for your team to spend so much money outsourcing the process to another firm without addressing the root cause of the issue.
If you’re working with many different consultants, freelancers, or contractors, then what you need is an automated 1099-NEC filing solution that integrates easily with the rest of your billing and payment processing tools.
Instead of running manual processes that break down, purpose-built tooling like Wingspan offers a single platform that automates the full contingent work lifecycle, making it easy to bill clients, onboard and pay contractors, and file 1099s:
- Ensure full tax compliance: Our automatic TIN verification, secure W-9 storage, and comprehensive audit logs keep you compliant, minimizing the risk of fines.
- Everything you need in one place: Import your contractors and payment data seamlessly from Wingspan or any accounting software or payment processors, ensuring a unified 1099 experience across all your vendors.
- Create 1099-NEC forms in one click: Auto-calculate 1099 totals from Wingspan transactions to generate accurate, reliable 1099-NEC forms in one click.
“You hear about a large firm acquisition and the obscene amount of hours needed to work in January because of poor processes,” says CPA Jody Padar. “There are firms out there who have standardized processes and cloud technology that can process 1099s in minutes, not hours.”
Automating this process keeps your team compliant without needing to chase down contractors or outsource this work to another firm.
Outsourcing vs. automation for 1099 filings: Which should you choose?
If your business depends on contractors, your finance and accounting teams need more than a manual process your teams dread. One business leader told us they have one employee who devotes half of her time in January just sending 1099-NEC forms.
With 1099 filings for your contractors, you have options:
Can you outsource your 1099 filings? Of course. But if you truly want to solve the problem, consider a tool like Wingspan that can automate every step of working with contractors, from a seamless onboarding flow to fast and reliable payouts.
“Wingspan is a must-have for any business that depends on contractors,” says Pacesetter CEO Bill Brassfield. “Wingspan helps us save costs on financial reporting, tax compliance, and invoice management.”
With Wingspan, you can automate creation, reconciliation, filing, and delivery of 1099 forms so there’s one place contractors can go for everything they need.
Ready to simplify 1099 filing? Join our webinar to uncover expert strategies and automation tools that will transform your tax season. Don’t miss out—save your spot today →
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