The IRS is infamous as a daunting government agency. You’d be forgiven for conjuring some not-so-positive adjectives about their paper forms, confusing acronyms, and complex tax filing processes. But with the new Taxpayer First Act law, the IRS is making moves to change its kafkaesque perception. Signed into law earlier this month, it sets deadlines and some new processes to move the agency into the 21st Century. Let’s take a look at how the new law impacts HR and payroll professionals.
I’m willing to bet that the last time you filled out a W-2 form it was a digital version. Most companies use an online employee portal, like Dominion’s Employee Self Service, that lets your employees check their pay stubs, request time off, and fill out important onboarding forms digitally. For businesses who still love a good paper trail, the new law will likely force them to eliminate this old fashioned practice.
Currently, companies with over 250 employees must file W-2s and 1099s digitally. Starting on January 1st, 2021, that number will reduce to 100. In 2022 it will drop dramatically; companies with over 10 employees will be required by law to file digitally with the IRS.
A Digital Portal for the 1099
The gig economy is growing and it doesn’t appear that opportunities for side hustles are diminishing any time soon. According to a study by Forbes, forty percent of companies expect that gig workers will become an increasing part of their workforce. In a move to modernize with this shift in the economy, the IRS will make an effort to make filing Form 1099 as easy and accessible as possible. The Taxpayer First Act requires the IRS to create a website for companies to maintain and file independent contractors’ 1099 forms. The law specifically states that the IRS should use the Social Security Agency’s website as a model for the 1099 filing website. The IRS has until January 1st, 2023 to launch the service.
Power of Attorney Standardization
One of the benefits of using an integrated payroll provider is their ability to file all local, state, and federal taxes on your behalf. When a payroll provider files your taxes for you, they’re operating under power of attorney. Power of attorney is the process of a third-party tax preparer’s ability to file and make inquiries on your company’s behalf.
The Taxpayer First Act requires the IRS to establish guidance and uniform standards on how power of attorney relationships are established and verified. The new rule will assist in the standardization and acceptance of taxpayer signatures when they appear on any power of attorney forms. The new law looks to emphasize this change by setting an ambitious deadline: the IRS has six months to publish these new guidances.
Improvements in Cybersecurity
The only thing worse than dealing with the IRS might be having your identity stolen. All jokes aside, the IRS is making a serious effort to diminish the monstrous headache of dealing with identity theft. The new law requires the IRS to have a single point of contact for identity theft victims. In the same vein, the IRS must now contact taxpayers if they suspect an individual is threatened by identity theft. It remains to be seen if this process will actually be efficient and prevent the worst aspects of stolen and misused credit, but it should make dealing with identity theft much easier in the future.
The image of the IRS will not change overnight. The behemoth government agency will in all likelihood remain a frightful entity. But the new law is taking a serious effort to make the tax filing process easier and more efficient for both businesses and individuals. And when it comes to the IRS, even change at a glacial pace is progress.