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Ten steps for streamlining your tax information reporting

Tara Ferris Photographic Portrait

05 minute read 13 May 2025

Related topics

Financial services

Financial institutions should start planning now to avoid issues next tax season.

In brief

Now is the time for organizations to reassess last year’s filing season and take steps to limit delays.
Tax teams can accelerate year-end processing through automation, including the use of artificial intelligence.
Deploying a proactive approach will help tax teams reduce the compliance burden throughout the year.

Taxpayers depend on the accuracy of Forms 1099 that they receive from financial institutions to meet their own filing obligations. This demand has a significant influence on the taxpayer's experience with their financial organization and has implications for an organization’s brand.

With the 2024 information reporting and withholding season in the US safely behind us, now is a good time for tax operations teams in financial institutions to look back at their reporting and withholding processes and reflect on what went well and what could be improved for the year ahead.

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Tax operations teams conduct their annual year-end reporting in a highly condensed timeline. Financial institutions must issue Forms 1098, as well as 1099, by January 31 of the year following the tax year in which the income was earned. The deadline ensures taxpayers have sufficient time to include the reported income in their tax returns, due by April 15 (without extension). Year-end data necessary for effective information reporting is finalized in the first two weeks of January, putting the tax operations team in a challenging position to meet the January 31 deadline.

On-time filing is dependent on income payment feeds from business units along with reference data from the onboarding and “know your customer” teams. These determine who is reportable, what income is reportable and what needs to be aggregated within the Internal Revenue Service (IRS) guidelines. As a result, potentially millions of forms are created, validated, printed and mailed. This process is never what we would classify as “straight through processing” (STP); there are always needs for exception processing to allow for edits, technology failures and income reclassifications. Tax operations can find themselves in the hot seat, complying with deadlines as best as they can.

Having a robust checkout process is best in class, but with so many forms, it’s hard to find a good statistical sample to help with the upcoming submission.

To complicate things further, the IRS has more than 25 different types of information returns. Keeping up with new and changing requirements is a challenge in itself.

Too often, processes and systems fall short, and costly mistakes are made. Common errors include:

Late receipt of information returns such as Forms 1099 and 1042-S, causing delays in filing returns and slower access to credits and refunds
Incorrect information submitted to the IRS, causing potential issues on tax returns
Hard copy forms delivered through the mail with sensitive information on them including personally identifiable information (PII)

Beyond the IRS compliance risk, financial and reputational risk are equally prevalent.

IRS penalties for late or incorrect filing of Form 1099 and Form 1042-S returns can range from $50 to $660 per form, depending on the delay and whether the error was due to intentional disregard. These penalties can accumulate quickly, especially for large institutions issuing numerous forms.

And, of course, the reputational risk of non-compliance is far-reaching, creating distrust and damaging your brand.

If you recognize some of these issues, the good news is that you have time to make adjustments before next year. In broad terms, we advise financial institutions to:

Specifically, we recommend these 10 proactive strategies to help improve information reporting processes and reduce the compliance burden throughout the year:

1. Automate processes

Implement automation tools to streamline the collection, verification and reporting of information returns. Automation reduces manual errors and saves time.

2. Regular data validation

Use tax identification number (TIN) matching services to ensure accuracy. This proactive step helps ensure that the TIN and name combinations are correct, reducing the chances of receiving B-Notices from the IRS.

3. Centralized data management

Maintain a centralized database for gathering all transactions and information. This ensures easy access and reduces the complexity of gathering data from multiple sources.

4. Early preparation

Start preparing well before the end of the year. Regularly review transactions and categorize payments correctly to avoid last-minute rushes.

5. Regulatory review

Keep abreast of regulatory changes – processes that worked well last year might need to be done differently this year.

6. Training and education

Provide ongoing training for staff on requirements and leading practices. Educated employees are better equipped to handle the complexities of reporting.

7. Governance and oversight

Establish the right committees to ensure compliance and manage risks.

8. Key performance indicators (KPIs)

Track KPIs to measure performance, helping to identify and address issues in good time.

9. Regular audits and reviews

Conduct detailed audits to identify discrepancies and fine tune processes.

10. Outsource when necessary

Consider outsourcing processing to specialized firms. Outsourcing can be cost-effective and ensure compliance.

The good news is that the EY organization can help! Our proprietary technologies, from our validation engines for tax onboarding and our reporting tools for Form 1099 and 1042-S reporting, as well as FATCA/CRS reporting can help your firm navigate the complex tax landscape. These technologies are available on a “plug and play” or “software as a service” basis. Our teams of subject-matter professionals are on hand to conduct an impartial business process review and advise on evolving your processes and systems.

Deadlines, penalties, data security, client satisfaction and varying state requirements all conspire to cause sleepless nights for even the most seasoned tax professionals. But the right planning, technology and advice can manage risk and ensure compliance.

Summary

Processing year-end tax forms for customers can sometimes turn into a needlessly difficult time for financial institutions. Now that last year’s tax season is in the rear-view mirror, organizations can begin to plan ahead by focusing on ways to streamline their workflows for delivering key tax information to customers. Automating processes, validating data and centralizing data management are among the key steps that can help improve operations in the future.

About this article

Tara Ferris Photographic Portrait

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.