You hate to do it, but you have no choice.
Paying them and filing them—taxes—are an inevitable part of every American citizen's life. Filing tax returns may cause frustration, anxiety and maybe even, depression to the average Joe Citizen, but to suppliers such as Oxnard, California-based TFP Data Systems it means expanding profit margins. Product manager Jim Magdaleno stressed that tax forms and related products equal "profitability, profitability, profitability, profitability, profitability." However, some get overwhelmed by the products due to the ever-changing rules and regulations that must be studied and the new codes that must be enforced.
Magdaleno said the solution is fairly simple. Manufacturers and distributors must to decide to sell tax forms and then just do it.
But for those who need that extra boost, TFP Data Systems provides marketing materials and information to help, support and make it easier for the reseller to sell tax forms. Some examples include a resource guide, imprinted catalogs, a programming guide, invoice stuffers and an information sheet explaining IRS year to date changes.
Paul Willard, sales manager for Grand Rapids, Michigan-based Broker Forms, explained the key to success in this market is a strong, knowledgeable supplier partner. Repeat business will follow.
"Nothing is certain in this world except death and taxes. As long as we pay income taxes, all businesses need to file W-2 and 1099 forms. This creates a very large market with stable, predictable, repeatable sales," Willard asserted.
Once distributors gain some experience, they can use their skill set when working with confused end-users, according to David Yost, general manager of Roanoke, Virginia-based InfoSeal.
"Many end-users consider the year end ordering, processing and mailing of these documents to be confusing and at best inconvenient, which is interesting considering the mission critical aspect of these year end documents. End-user discomfort with tax forms is an opportunity for the distributor," he said.
And there already are changes on the horizon for distributors to learn about and ultimately use to their advantage. Willard noted there are major compliance changes for the 1099-MISC reporting in the healthcare legislation package recently passed by Congress. "These new requirements say that businesses must file a 1099-MISC form for any business payment or purchase that exceeds $600 in a calendar year, starting Jan. 1, 2012," he said. "Although there is still debate about the specifics of these regulations, there will certainly be changes to 1099-MISC reporting over the next two years."
He continued, "Also new for this coming 2010 tax season are the following changes: Form W-2 and W-3 have been revised by the IRS. The instructions printed on the back of Form W-2 Copy 2 and Copy C were changed to accommodate the payroll tax exemption and business tax credit related to the HIRE Act, and a new code for box 12 was added. In addition, box 12b was added to the W-3 for HIRE exempt wages and tips. Similar changes were made to Form W-2c and W-3c."
Furthermore, he said Form 941 was updated for 2010 second quarter reporting as a result of the HIRE Act. This form also is valid for the third and fourth quarter. Copy designations on Form 1098 are changing as well. Copy B will be "For Payer/Borrower" (formerly "For Payer"). Copy C will be "For Recipient/Lender" (formerly "For Recipient."). Form 1099-G has been updated to add Boxes 10a, 10b and 11 for the convenience of those states requiring state income tax withholding on unemployment compensation. There were no changes to envelope compatibility. Box 10 was added to Form 1099-INT to report the Committee on Uniformed Security Identification Procedures (CUSIP) number for each tax-exempt bond for which interest was reported in box 8. And finally, the copy designation on Copy C of Form 1099-SA was changed from "For Payer" to "For Trustee/Payer."
To E-File or Not to E-File
End-users are looking for the convenience and time-saving tactics that electronic filing can provide. E-filing of Copy A forms is on the rise, Willard observed, and new "print and mail" services take a customer's data and do the work for them, greatly reducing labor and improving accuracy.
While some businesses are choosing the electronic route, causing some paper-based tax forms to become obsolete, don't discount tangible copies just yet. "... Businesses have been saying for 20 years that paper is becoming obsolete, and it's still around today, so the migration is slow, and there is still a lot of opportunity to sell paper," Willard said.
InfoSeal offers stock and custom run pressure-seal tax forms. "We also provide print and mail services for your end user's year end tax form runs, regular monthly mail and for promotional mailings," Yost stated. He added, "Tax forms are a terrific way for the reseller to introduce pressure-seal self mailers versus envelope inserted mail. It's assured that someone will present the customer with a pressure-seal solution—it may as well be you."
Ft. Scott, Kansas-based Ward/Kraft often receives requests for custom pressure-seal forms for W-2's in a cut sheet format or continuous format, said Jeanette Perry, forms sales representative. Ward/Kraft also offers other value-added forms such as u-seal, form-n-envelopes and integrated products.
A trend Magdaleno has noticed is switching from continuous and mailer formats to laser forms. "More pressure-seal products [are] being sold each year. But with all the changes, tax forms are still a mandatory product and the employee still receives hard paper copies of the W-2 (99 percent of the time)," he mentioned. And, he noted while in 2008, 58 percent of all W-2s (Copy A) filed to the IRS were filed electronically, a paper copy was still sent to the employee, state and other municipalities, if applicable.
Nevertheless, those who embrace technology will definitely reap the benefits. If a distributorship can position itself to be a provider of technology solutions, its business can and will continue to grow. In addition to supplying pressure-seal products, TFP Data Systems makes it easy not only for its partners to sell, but also for end-users to buy the right form with Tax Form Wizard (www.taxformwizard.com). Magdaleno went on to discuss E-fileforbusiness.com. "[This] targets a segment many resellers are not currently selling to. It's an electronic solution that you can offer from your website and receive 25 percent residual from the sale. It provides value and traffic to your site," he said.
Willard pointed to Broker Forms' research in the small business market and said it has driven the company to focus on offering more products that businesses find most useful to help them process 1099s and W-2s in the most efficient way. "We're focusing more efforts to online filing, with EZ1099W2.com, which e-files with the government, then automatically prints and mails recipient and payer copies. Users can type in data, or import it from most accounting software," he noted.
And, it's a quick pay to pick up extra cash. "Distributors can refer customers to EZ1099W2.com and get paid a commission on each filing," Willard said. "It's very easy to place a link on the distributor's website and get paid for simply referring customers; there's no additional work for the distributor. Offering a technology option in addition to paper forms allows distributors to attract new customers and retain existing ones who are looking to technology to solve business challenges."
Whether your company offers paper-based forms or electronic options, the important thing is that you will be jumping head first into the tax form pool. And, if it isn't your business, some other business will be sure to make a splash.