Selling Tax Forms Doesn’t Have to Be Taxing — Here’s Why
Death and taxes are two certainties in life, as Benjamin Franklin once wisely said. But oftentimes what distributors aren’t so sure about is how to navigate the constant and complex tax law changes that follow. In the last two years alone, the market has seen some of the biggest changes since the introduction of 1095 forms, introduced by the Affordable Care Act. There have also been increased whispers surrounding the IRS’ plan to reduce the threshold for mandatory electronic filing of tax information returns. Add COVID-related supply chain troubles and paper shortages to the mix, and many distributors are left wondering if tax forms are still worth their time and energy. The answer is a resounding “yes,” according to our industry experts, and they are here to help.
Among those participating in Print+Promo Marketing’s roundtable discussion are: Elyse Kaplan, director of sales for ComplyRight Distribution Services, Pompano Beach, Florida; Teresa Budzynski, partner relationship manager, and JB Hunt, account manager for Broker Forms, Grand Rapids, Michigan; and David Yost, general manager of InfoSeal, a Div. of Ennis Inc., Roanoke, Virginia. Read on as they explain what distributors can expect for the upcoming tax season, how they can be successful and why they need supplier partners.
Tell me a little bit about your tax vertical offering.
Elyse Kaplan: We are a one-stop shop for distributors looking to offer any type of tax information reporting products and services to their customers. Our product scope includes everything from traditional tax forms, envelopes and desktop software to fully outsourced printing, mailing and e-filing of tax information returns. We have the expertise and the capacity to service everyone from small independent dealers to big-box retailers, whether they are looking for efficient drop-shipping, custom packaging, white-glove tax filing services and even private-labeled websites that enable DIY e-filing for the end-customer. Our offerings cover virtually every type of information reporting form — from the most common 1099 and W-2 forms to ACA forms and highly specialized 1098 forms.
As part of Taylor Corporation, we have the benefit of sophisticated sourcing and supply chain management teams and access to a large network of printing and warehousing facilities across the country. These robust resources provide economies of scale that allow us to maintain competitive pricing for even the most specialized items and services. We place a high priority on privacy and security, and all of our locations are SOC-II and HIPAA certified. We are also EDI-capable, which provides for efficient and error-free order processing. Combined with our multiple distribution centers, this ensures fast turnaround for end-customers.
JB Hunt: Broker Forms is a leading tax form supplier (e.g., W-2, 1099 and 1095) to forms distributors. As the experts in tax form reporting, we offer support and guidance for wage and information reporting through our expert account managers, dedicated customer service, electronic sales support and marketing tools. In addition, we supply business products, such as: business checks, envelopes, large mailers, mortgage products and more. Broker Forms is committed to our customer relationships and helping them with their tax form and business supply needs.
David Yost: [We offer a] full range of essential tax stock forms: W-2, ACA/1095, 1099, 1098MORT/INT, and 5498 and blank stock to make your own. We have inventory stock forms (starting at orders of 500) and custom options (for orders exceeding 100m). The advantage of our stock program is that the product can ship quickly. Inventory is usually ready in October with layouts available in late August to September.
Is there anything new on deck for the upcoming tax season? Has the IRS made any recent tax form modifications that will affect businesses?
EK: In preparation for this upcoming tax-filing season, our in-house research team is keeping its collective ‘ear to the ground’ and listening for cues from the IRS regarding what is on the horizon. We are also active in the NACTP (National Association of Computerized Tax Processors), another great source of industry intelligence.
The biggest ‘buzz’ we’ve been hearing for a while is that the IRS plans to reduce the threshold for mandatory electronic filing of tax information returns from 250 to 10 forms per employer. This means every employer with 10 or more employees or contractors may be required to file W-2s or 1099s electronically rather than mailing these information returns to the IRS. If and when that happens, we expect a dramatic market shift toward electronic print, mail and e-file.
Beyond that, our research team monitors tax form releases year-round, and we always see minor changes to many of the forms from year to year. We are often the first to identify a required change and we have a finely tuned process that ensures those changes make it to market in lightning-fast time.
Teresa Budzynski: In the past couple of years, we have seen a few large changes. The addition of Form 1099-NEC (Nonemployee Compensation) replacing Box 7 of the 1099-MISC. Last year, the IRS changed the format of Form 1099-NEC from 2up to 3up. These were some of the largest disruptions to tax reporting for businesses since the introduction of Form 1095 (ACA reporting). It is still too early to tell if changes will take place for this upcoming tax season, but proposed IRS regulations were released last year recommending the lowering of the e-file threshold for information returns. This proposal is pending final approval since last year, meaning the e-file threshold will remain at 250 until final regulations are issued.
DY: Last year, due to COVID and the high demand, InfoSeal’s lead times were challenged and this year we are adding capacity. InfoSeal still offers shipping out of our warehouses in AZ and VA, which allows two-day arrival for most of the US.
We have and are making some changes in 2022 to help avoid a similar situation. We have expanded and trained additional operators, as well as added an additional finishing line, which will allow us to process additional work and hopefully help keep our lead times shortened.
What are the typical needs of the end-user clients in this vertical?
EK: In today’s tax world, there is no ‘typical’ end-customer. There are big differences between low-volume 1099-NEC filers, who are often very small businesses and even solopreneurs, and, for example, large employers who issue thousands of W-2s or educational institutions that are required to issue 1098-E forms to student borrowers.
As a result, the distributors who are seeing the most success are those that offer the widest range of forms and formats, including traditional paper forms and software, do-it-yourself e-filing websites, and high-touch services for large organizations looking to outsource the entire process.
One thing that is becoming increasingly typical is electronic filing. Once customers of any size understand that they can replace a complex, three- or four-step process — complete the form, print it, distribute it to the recipient, e-file it with the appropriate federal and state agencies — with a one-step process that takes care of printing, mailing and e-filing it for them, they never go back to the old way.
Still, some organizations prefer a traditional approach, and that’s why we continue to offer a wide variety of physical and digital solutions to satisfy how different organizations are comfortable operating.
JBH: Our customers’ needs are simple. There are federal, state and often local government requirements to report wage and information (e.g., W-2, 1099, and 1095), in addition to getting the employee/recipient copies mailed by Jan. 31 of each year. The timeliness of communicating changes, shipping product and following up is of utmost important where deadlines are present.
DY: Typically, end-users need last-minute stock (maybe in small quantities), which we hope they will call on us to help provide. We have flexible options from 500 sheets to 25,000 for a quick turnaround stock order; therefore, InfoSeal is a one-call location for anything pressure seal. Often, customers use our formats as the base for a custom run as well. End-users can trust that our formats are IRS-compatible.
What should distributors know before attempting to break into the tax market?
EK: At the very least, they should understand certain major trends that are currently taking place. First is the IRS push toward electronic filing, which I just mentioned. While the timing may be in question, there is little doubt that the IRS will eventually lower the threshold for mandatory electronic filing from the current level of 250 filings. This is part of the agency’s effort to increase internal efficiencies by eventually eliminating paper forms altogether. Offering a digital filing option is essential for any new distributor.
Second is the pricing pressure that has resulted from the proliferation of online sellers offering essentially the same product. New distributors looking to offer tax products at a healthy margin must commit to providing responsive and knowledgeable customer service as a differentiator. We make a point to provide exceptional training, ongoing communication and reliable customer support to our resellers for just this reason.
Third is the increasing acceptance of cloud-based data processing. Small businesses have been some of the last holdouts in terms of getting comfortable with using online software for processes that deal with sensitive data. But the convenience, efficiency and affordability of web-based solutions, combined with advances in cybersecurity tools and techniques, are causing more and more small businesses to embrace online filing of tax information returns.
Finally, they must understand that manufacturing costs are skyrocketing and supply chain issues continue to cause disruption. This is one more reason to focus on offering electronic filing solutions. And for those who do wish to offer traditional forms, they will want to work with a partner that has a firm handle on supply chain issues.
DY: Any distributor getting into the tax marketing for the first time needs to understand that with the current labor and paper shortages, they need to place orders well in advance. They should be touching base with their customers in September to secure orders. This is far earlier than they ever have had to in prior years. One other item to note: The distributors do not need to be an IRS expert. InfoSeal forms are compatible with most software, and the IRS gives great flexibility to design options.
The IRS doesn’t require that “this space has to be in this location on the page,” etc. For example, we have a 1095C-PV (vertical) and 1095C-PH (horizontal), which has the same information on it, but the layout is in two different directions. Depending on the end-user’s needs, their software restraints might cause them to use PV over PH, or vice versa.
How have paper shortages affected tax form orders, and how are you helping distributors work through this problem?
EK: This year, no manufacturer is immune to the impacts of paper shortages and other supply chain issues. Again, this is just one of the factors pushing the market toward e-filing and outsourcing tax form printing and mailing.
For distributors of our paper-based products, we are working closely with them to anticipate demand well in advance of season and communicating the critical importance of ordering early this year. And again, as part of Taylor Corporation, we are fully leveraging our internal sourcing and supply chain experts to secure materials and prepare inventory much earlier than in previous years.
TB: Our commitment remains the same, so early planning and communication is important. For distributors, it’s receiving tax forms (e.g., W-2, 1099 and 1095), to meet their customers’ needs in time for the Jan. 31 deadline. We have heard that other distributors have had difficulty obtaining or keeping tax forms in stock, leaving distributors struggling and looking for product from other suppliers. Due to our expertise in tax reporting, Broker Forms works year-round to ensure we have the right products, sufficient inventory, and services in place to handle high demand during the most crucial times of year-end reporting. In the last two years, we helped many distributors who turned to us during the shortages, without compromising our own long-term customer relationships.
DY: Paper issues will continue through the tax season, and we have been encouraging all customers to order early. Because tax forms are predominantly ordered in fourth quarter, any large customer’s non-tax pressure seal orders are being encouraged to place them in the summer so that we can get those out of the way or shift volume, leaving plenty of scheduling time for required tax products to be produced and shipped on time. The shortage of envelopes is also another reason to make pressure seal an alternative to mailing required documents for the tax season. Anything that can be put on one or two sheets of paper and inserted in an envelope can be redesigned into a pressure seal single sheet of paper with no paper waste.
Are there any other challenges associated with the tax sector? (e.g., differing state laws especially with a large portion of the workforce now remote, etc.)
EK: There have always been state-specific requirements for tax information reporting. This is a particularly complex aspect of filing information returns that creates added pain for end-customers in certain states. We continue to expand our capabilities in this area by enabling more direct-to-state filing options.
The regular introduction of new forms is another challenge. One example is the recent addition of the 1099-NEC, which replaced the 1099-MISC for independent contract workers. In the future, we anticipate new forms being issued to support formal reporting of Bitcoin and NFT payments, possibly as soon as next year.
JBH: Remote work has not impacted distributors and businesses tax reporting, as much as other markets. There has been a consistent push over the last two decades toward e-filing to government agencies; however, this has not translated into electronic delivery of employee/recipient copies yet. The government allows for electronic delivery to employees/recipients, but the process is cumbersome, and most businesses do not find it worth the cost.
DY: Some challenges have come with the IRS releasing copy changes and final drafts for ACA forms much later in the year which has delayed our production of required documents/forms. On a positive note, the IRS made a permanent change for the filing date of the ACA’s forms to March 2. This is helpful for production as it provides additional time for us to produce the ACA’s and for our customers to get them out in the mail. With more people working remotely due to COVID, pressure seal tax forms provide easy mailings, running efficiently through postage meters. Prior to COVID, many of the tax forms were handed out in person at the office.
How does the selling process for distributors working in the tax market differ from other major verticals? Are there certain peak times for orders, and are distributors entitled to special discounts if they order within a certain time frame?
EK: The buying season for tax information return forms is incredibly tight. The vast majority of end-user sales come in during a two to three week period in January. But the ramp-up to support this spike in demand takes months.
We start working with our distributors to place orders in the early fall, and we begin communicating with them well in advance of that. We want to make sure they are aware of any market trends, new selling opportunities and potential challenges in time to plan their sales, marketing and operational activities. We also equip them with the information and resources they need to educate their customers, answer their questions and strengthen those relationships. We even provide “brandable” marketing materials and a suggested marketing schedule for the upcoming season to help them be as effective as possible.
The tight selling season means that we all must be prepared to handle a large volume of customer service calls and emails in a short time period. Information returns have hard deadlines, so customers expect fast response times. We are here to support our distributors during those peak call times.
TB: The peak busy time for tax forms is December and January, although the months of September-November are often when customers are placing their orders. To best serve customers we encourage early ordering. This helps distributors avoid the hectic January rush and helps us to ensure sufficient supply and projections for purchasing.
DY: InfoSeal has a stock agreement price if a customer/distributor buys in bulk — an annual agreed-upon quantity — they can get discounted pricing by combining volume with other stock pressure seal products not in the tax portfolio. InfoSeal offers tax forms in any quantity from 500 (1/2 a box) to our largest tax order last year which was 15 million. Order early!
What types of questions should distributors be asking their clients in this sector? On the flip side, what questions should distributors be prepared to answer?
EK: The questions can vary widely. We always start with the best practice of asking our distributors about their individual needs, challenges and competitive pressures, as well as who they serve and what they are hearing from their customer base. With that as a foundation, we tap into the market intelligence that our research team gathers to arm our distributors with customized “tips and techniques” that help them ask relevant and timely questions to spark conversation and bring real value to their customer relationships.
We also prepare a FAQ document each season to help our distributors build their knowledge and confidence when speaking with their customers and prospects. Typical end-customer questions can range from the technicalities of recent tax law changes to how to choose the best product options for their particular situation. This year we anticipate more questions surrounding supply chain challenges – more specifically inventory availability. Our FAQ will provide messaging reinforcing the importance of ordering early this tax season.
TB: Distributors should simply ask if customers do their own wage and information reporting. It is important to understand that even if a business doesn’t have a large number of employees, they may have a high volume 1099 reporting need. Distributors should inquire beyond a prospects W-2 needs and find out if they have any other types of 1099 or 1095 reporting needs.
DY: They should be asking about storage needs. We can store part of a large order here at the factory until a customer needs their remaining quantity for a monthly rental fee plus a “release” fee. This will help the customer get a lower price point on one order rather than trying to get in the schedule for two smaller orders with lead times typically extended during fourth quarter.
Is there a particular tax order case study that you recently worked on with a distributor that stands out to you?
EK: A couple of years ago, one of our traditional tax form distributors was looking to offset a decline in sales of paper tax forms. We worked with them to set up a private-labeled e-filing website for their audience of accountants and small businesses. We provided marketing support in the form of emails, blog content, banner ads and direct mail pieces to promote the new offering. First-year results were respectable, but the real magic came in the second year: They saw a 500% increase in sales and a retention rate of 80% on their e-file customers.
One of the benefits of offering an e-filing website is that once the recipient data is entered in the system, the customer can pull up that same recipient the following year and the filing process becomes that much faster. The ‘stickiness’ created by storing recipient data and making it available the following year typically translates to very high retention rates.
DY: We had a customer that was under time constraints to get taxes out. Traditionally, they process W-2 and ACA’s forms as separate mailers. We worked with the client to develop a form that incorporated both the W-2 information and ACA information on one form. The result was the client only has one mailer to image and send. This saves time in production, material costs for paper/postage and used less labor.
Elise Hacking Carr is editor-in-chief/content director for Print+Promo magazine.