The Internal Revenue Service (IRS) requires that Form 1099-MISC be filed electronically over the Internet whenever the total number of forms exceeds a specified minimum. In 2008, this level is 250. The IRS also encourages Practitioners, Service Bureaus and companies that report several payrolls to use the Internet. The IRS electronic filing system is referred to as the F.I.R.E. system (File Information Returns Electronically).
Electronic filing is so much faster than paper filing that we recommend you use it if at all possible.
There is no lower limit on the number of 1099's in a submission. This means you can file even one 1099 on the internet!
The other beautiful thing about electronic filing is the F.I.R.E. system e-mails you the results of your submission, usually the next day (although the IRS suggests waiting two days). You know almost immediately whether your filing is acceptable.
Getting IRS approval
Prior approval from the IRS is required. You can find all the necessary information at this IRS website, http://www.irs.gov/efile/article/0,,id=165534,00.html
Here's how to complete Form 4419 - Application for Filing Information Returns Electronically. This form is available at the IRS site mentioned above in a filable-PDF format.
1. Complete boxes 1-3 using the Firm Information.
2. Skip Box 4.
3. In Box 5 enter the current year.
4. In Box 6 answer No.
5. Put an X in the box beside Forms 1098, 1099, 5498 and W-2G in Box 7.
6. Complete and sign in Box 8.
The following statements are from Form 4419:
"In order to ensure timely filing, submit Form 4419 at least 30 days before the due date of the return.
If you prefer, the Form 4419 can be faxed to (304) 264-5602, but do not do both (faxing and mailing).
If your application is approved, IRS will assign a TCC to your organization. We will not issue your TCC without a signed Form 4419, and we will not issue a TCC over the phone or by e-mail. If you do not receive a reply from IRS within 30 days, contact us at the telephone number shown below.
Do not submit any files until you receive your TCC. For further information concerning the filing of information returns with IRS electronically, you may access www.irs.gov for Publication 1220 for the current tax year. If you do not have internet access, you may contact the IRS Enterprise Computing Center - Martinsburg toll-free at (866) 455-7438 between 8:30 am and 4:30 pm Eastern Standard Time."
7. Record the TCC in the Firm file.
Preparing the submission
A 1099 Electronic submission consists of:
• A Transmitter record
• An identifying record One or many SETS of:
• Payer (Client) identifying record
• 1099 records
• Client total record
• A final record
CCIS Payroll prepares submissions that can be sent by the internet to the IRS electronic filing center.
To prepare the submittal:
1. Carefully check your data. The submission process cannot be stopped and restarted.
2. Select the Reports link.
3. Choose Year-end Reports from the Reports menu.
4. Choose 1099, then Electronic. The Transmitter/Submitter Header Information window appears:
5. The Transmitter is the entity that has the TCC. It does not necessarily have to also be sending its own data. If it is sending its own data, it must also be set up as a Client. The areas that have a blue label are required.
6. The Name and identification information must be exactly the same as was used when you applied for the Transmitter Control Code. Since the Firm is normally the entity that is sending the data, identification information is drawn from the firm file the first time you display this window.
7. You can make any changes you like to this information. If you choose Save, the information is saved in a different file for future 1099 submissions. The Firm information stays the same, unchanged.
8. The location of the submission file is shown in the Name and location of your file area. Note this information down. You need it in order to send the file.
9. Use the Select clients to process list box to tell CCIS Payroll which Clients to put in the file.
To select a Client, use the up and down arrows on the right of the list box to scroll through the Clients. They are in alphabetical order. When the desired Client appears, select the name to have it turn blue. A checkmark or X (depending on your operating system settings) appears beside every Client that is chosen.
10. The Clients selected area shows the number of Clients that you have selected to send.
11. When you are ready to send the file, select the Make the file button. CCIS Payroll puts every selected Client into the file.
Sending the 1099 submission
Depending on the size of your file and the speed of your internet connection, you might want to compress your file before sending it. SSA accepts files in the standard ZIP format. ZIP-file creation software is available from several vendors and goes under the names of PKZip, WinZip and others.
These companies all have web sites.
1. Choose the Send to IRS button from the preparation window.
2. Enter your User ID and Password, and then choose Login.
3. Read the important bulletins then choose Click here to continue in the upper-right of the page.
4. Choose Send Information Returns.
5. Enter your IRS-assigned TCC, and the EIN associated with it. This is the same EIN you used completing Form 4419.
6. Verify the information. Change as necessary and choose Accept when you’re ready.
7. Choose Original File. (CCIS Payroll does not support Replacement and Correction files.)
8. Read "The Legalese" then enter your PIN (chosen when you registered) and choose Submit.
9. Your file is called IRSTAX (unless you changed in when making a ZIP) and it is usually in C:\ISPAYW\[the current year].
10. Either enter the file name, or choose Browse to find it. Select Upload when done.
11. The IRS responds with a file name and number of bytes received. Verify that against the actual file by right-clicking the file name and reading the size from the Properties box.
12. If you’re satisfied, log off the IRS F.I.R.E. site. The IRS will send you an e-mail within 2 days. If you haven’t received one, log back onto the F.I.R.E. site and check the status.
How to view an electronic file
Windows provides all the tools you need to view a magnetic media file on the screen. Small files can be read using Notepad. Larger files can be read using WordPad.
1. Choose Start | Programs | Accessories | Notepad.
2. Choose File | Open. Select the current year’s directory
• To read a W-2 submission, look for files called W2REPORT.
• To read a 1099 submission, look for files containing IRSTAX.
3. Double-click the file to open it. (If the file is too big for Notepad, Windows offers to use WordPad.)
4. Choose File | Exit when done.
5. Do NOT save any changes if prompted by Notepad or WordPad.
6. If you change the file in any way at all, it will not be acceptable and you'll have to repeat the entire process.
Reviewing electronic files
Both W-2 and 1099 magnetic media files are written in standard ASCII. They can be printed or viewed without any special software. This means that your review reads exactly what the SSA/IRS computers will be reading.
W-2 files are called W2REPORT. Each record or line in the file is exactly 512 characters long. The contents of each part of the file are specified in SSA publication MMREF-1.
The SSA provides a free software program that reads MMREF-1 files and checks them for proper formatting. The program does NOT check the actual contents, just whether the file is made properly.
You can get the file from the SSA BSO site.
1099 files are called IRSTAX. Each record or line is exactly 750 characters long. The contents of each part of the file are specified in IRS Publication 1220.
A quick way to check the file is to look at the total records. Generally, if those prove to your controls, the rest of the file is OK.