Navigating the ins and outs of 1099 reporting for small businesses can be tricky, whether you are based in California or any other state. Each state may have some unique electronic filing expectations that can become confusing on top of the federal requirements. The guide below was designed to assist California small business owners, or an accountant or bookkeeper, in knowing what goes into e-filing 1099s in their state and how tax and accounting software can help streamline the process.
Advanced Micro Solutions’ 1099-etc E-Filer software is part of a modular suite of tools and the most affordable solution on the market.
Our electronic filing software gives California small business users a chance to choose between two distinct options: E-File Direct and E-File Services. Whether small business users select our add-on module or utilize our services through a third-party vendor, the software allows them to submit each of their forms accurately and on time.
How Does California 1099 E-Filing Work?
The federal 1099 reporting rules may not differ greatly from state to state in certain cases, but you should be aware of state-specific tax filing rules and how they affect your small business.
- Combined Federal/State Filing (CF/SF) program: California participates in the CF/SF program. If you file your federal 1099 forms electronically, and the amounts match state requirements, you do not need to send your data to the California Franchise Tax Board. The Internal Revenue Service will submit that for you as part of the program agreement.
- Separate Electronic Filing: Direct electronic filing is generally mandated by the state if you do not participate in the CF/SF program, under certain circumstances. Filing 250 or more single-type 1099s will trigger that requirement for small businesses. If you happen to fall below the threshold, you can at times file via CF/SF or paper federal with the IRS. You do not need to send a separate state submission if the amounts that you reported to both the federal and state are identical.
- State Information Returns Deadline: March 31 is California’s remittance deadline if you file via CF/SF.
- Differing Amounts: You may find that your business needs to report different amounts, or different information, for state versus federal returns. If what your business needs to report to California differs from what you submitted to the IRS, file separate returns for total compliance.
Electronically filing tax forms is the most efficient method of submitting information returns and improves your overall accuracy. There is a less than 1% error rate for e-filed returns compared to 21% for paper returns.
Best Practices for 1099 Small Business E-Filing in California
Preparing well before tax season can make state and federal filing less error-prone. Using a trustworthy and affordable program makes that possible for small businesses on a budget.
- Step 1: Collect all of the W-9 forms before you pay any of your independent contractors. Check to confirm that forms include correct legal names, TINs/EINs, and the addresses of your workers.
- Step 2: Establish who truly counts when it comes to the 1099 reporting so that you know which side of the e-filing threshold that you fall on each year. Using tax software will help you to move the process along on both the state and federal levels.
- Step 3: File through the CF/SF federal program with supported tax software to save your small business time if you can only afford to file in-house. Doing so can help you reduce the expense of separate state filing tasks.
- Step 4: Make sure that you meet all of your state’s tax obligations. California businesses also report independent contractors to the Employment Development Department (EDD) with Form DE 542M.
Following these steps will not only simplify the tax preparation process for small businesses in California, but it will also help multi-state businesses with varying compliance standards.
E-Filing with AMS Software
How a small business electronically files its tax forms typically depends on a number of factors, including the business’s size, location, and the person who is responsible for handling the filing. Download our free 1099-etc Demo software to see how our E-Filer interacts with our W-2/1099 Forms Filer base program.
If you are unsure which e-file option best suits your business’s needs, experience the features firsthand and consider the aspects of e-filing that you are struggling with right now.
E-File Direct
- Flat fee
- Unlimited number of form filings
- Users can verify, view, and print files
E-File Services
- Volume pricing (fee per form)
- Forms are e-filed through a third-party vendor
- Different service levels available