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Filing Form 1099 correctly and on time is a critical compliance requirement for businesses, but the process can be complex, time-consuming, and fraught with potential for costly errors. As organizations look for ways to streamline their 1099 reporting, many turn to software solutions to help manage this annual obligation.
But what exactly is 1099 software? What options exist? And most importantly, how do you determine the right solution for your specific situation?
This comprehensive guide explains everything you need to know about 1099 software—from basic functionality to advanced features, DIY options to full-service platforms, and how to choose the approach that best fits your organization’s needs and resources.
What is 1099 Software?
1099 software is a technology solution designed to help businesses prepare, file, and distribute IRS Form 1099 and related tax information returns. At its core, this software automates what would otherwise be manual processes: data entry, form generation, validation, electronic filing, and recipient distribution.
The primary purpose of 1099 software is to reduce the administrative burden and error risk associated with tax form compliance while ensuring your organization meets all IRS requirements and deadlines.
Core Functions of 1099 Software
Most 1099 software solutions provide these fundamental capabilities:
Data Management: Accept and organize payee information including names, Tax ID numbers (SSN/EIN), addresses, and payment amounts. Quality software validates this data against IRS specifications to catch errors before filing.
Form Generation: Create IRS-compliant 1099 forms populated with your data. This includes proper formatting, box placement, and adherence to current-year specifications that change periodically.
E-Filing: Transmit completed forms electronically to the IRS through authorized channels. E-filing is required by the IRS for businesses filing 10 or more information returns.
Recipient Copies: Produce copies of forms for distribution to payees, either through printing capabilities or electronic delivery options.
State Reporting: Handle state-level 1099 filing requirements, which vary significantly by state. This may include direct state filing or participation in the Combined Federal/State Filing (CF/SF) program.
Reporting: Generate summaries, control totals, and audit reports for your internal records and compliance documentation.
Beyond these basics, software solutions diverge significantly in their approach, features, user experience, and level of support provided.
Types of 1099 Software Solutions
Understanding the different categories of 1099 software helps you identify which type aligns with your needs and capabilities.
Desktop Software
Desktop software is installed and runs on individual computers or local servers within your organization.
Characteristics:
- One-time purchase or annual license fee
- Runs locally on your hardware
- Data stored on your systems
- Manual updates required for tax law changes
- Limited to specific devices where installed
- No internet connection required to use (though needed for e-filing)
Best for: Small businesses with simple needs, organizations with limited internet reliability, those who prefer local data control.
Limitations: Requires manual backups, software updates, and IT involvement for maintenance. Can’t access from multiple locations easily.
Cloud-Based Software (DIY)
Cloud-based DIY software runs in your web browser with data stored on the provider’s servers. You handle all data preparation and form management yourself.
Characteristics:
- Subscription-based or pay-per-use pricing
- Access from anywhere with internet
- Automatic updates included
- No installation needed
- Multi-user access possible
- Provider handles backups and security
Best for: Organizations with capable accounting staff, distributed teams, businesses wanting modern technology without local IT overhead.
Limitations: You’re still responsible for data accuracy, understanding requirements, and troubleshooting issues. Support is typically limited to technical problems, not compliance guidance.
Cloud-Based Platform with Service
This category combines modern cloud software with comprehensive service and support. Rather than just selling you software to use on your own, these providers offer their platform as part of a full-service solution.
Characteristics:
- Cloud-based technology (no installation)
- Expert staff review and validate your data
- Comprehensive service (printing, mailing, e-filing, corrections)
- Included support and compliance guidance
- Platform access without software maintenance burden
- Often no separate software fees (included in service pricing)
Best for: Organizations wanting modern technology without DIY burden, businesses prioritizing accuracy and compliance, companies without dedicated tax form expertise.
Advantages: Combines the convenience of cloud technology with expert oversight. You get the software benefits plus human review, service, and support.
For example, ts1099 provides a cloud-based platform as part of its full-service offering. Clients access the web software to upload data and review forms, but data analysts validate everything, and the service includes printing, mailing, e-filing, and unlimited corrections. This approach delivers modern technology without requiring software expertise or management.
Essential Features to Look For
Whether you choose DIY software or a platform with service, certain features significantly impact your experience and outcomes.
Data Input and Validation
File Import Capabilities: Software should accept data from various sources—Excel spreadsheets, CSV files, accounting system exports, and database connections. The more flexible the import process, the less time you’ll spend reformatting data.
Automated Validation: Look for software that automatically checks for:
- Proper Tax ID number format (9 digits, correct format)
- Required fields completion
- Valid box amounts and calculations
- Name/TIN matching requirements
- State filing requirements by recipient location
Good validation catches errors before you file, preventing IRS penalties.
Error Reporting: Clear, actionable error messages help you quickly identify and fix problems. Vague errors like “data invalid” waste time. Quality software tells you specifically what’s wrong and how to fix it.
Form Support and Flexibility
Multiple Form Types: Ensure the software supports all 1099 forms you need: 1099-NEC, 1099-MISC, 1099-INT, 1099-DIV, 1099-B, 1099-R, etc. Some software only handles common forms.
Current Year Compliance: The IRS updates form specifications and requirements annually. Software must stay current with:
- Latest form layouts and box definitions
- Current filing deadlines
- New reporting requirements
- Updated state regulations
Correction Capabilities: You will need to make corrections. Software should handle:
- Amended returns (corrected forms after filing)
- Void and reissue processes
- Proper correction coding (Type 1 vs Type 2)
- Automated IRS retransmission
E-Filing Capabilities
IRS Authorization: Only IRS-authorized e-file providers can transmit directly to IRS systems. Verify the software vendor has this authorization.
Federal and State Filing: Quality software handles:
- Federal e-filing to IRS
- Combined Federal/State Filing (CF/SF) program participation
- Direct state filing for non-CF/SF states
- Confirmation of IRS acceptance
Filing Status Tracking: You need visibility into whether your forms were accepted or rejected by the IRS. Real-time status updates prevent missed deadlines.
Recipient Distribution Options
Printing Support: If mailing physical forms, software should:
- Generate forms on official IRS-approved paper stock
- Support pressure seal forms (more secure than envelopes)
- Include SSN/TIN masking for security
- Produce mail-ready output
Electronic Delivery: Modern solutions offer:
- Secure online portals for recipient access
- Email delivery with encrypted PDFs
- Multi-year form access for recipients
- Consent management for electronic delivery
Reporting and Record Keeping
Comprehensive Reports: Useful reporting includes:
- Summary reports by form type
- State-by-state breakdowns
- Control totals for reconciliation
- Audit trails of all changes
- Historical data access
Export Capabilities: You should be able to export data and reports for your records in standard formats (PDF, Excel, CSV).
User Interface and Experience
Intuitive Navigation: Tax season is stressful enough. Software should be:
- Easy to learn without extensive training
- Logical workflow from data upload through filing
- Clear instructions and guidance
- Minimal clicks to complete common tasks
Multi-User Support: If multiple people need access, look for:
- User permission controls
- Simultaneous access capabilities
- Activity logging by user
- Secure authentication
DIY Software vs. Full-Service Platform: The Real Comparison
The fundamental choice most organizations face is between doing it yourself with software versus using a full-service solution. Understanding the actual differences helps you make an informed decision.
What DIY Software Provides
Technology Only:
- The software application itself
- Electronic filing capabilities
- Form generation tools
- Basic validation rules
What You Must Provide:
- Data preparation expertise
- Understanding of IRS requirements
- Error troubleshooting skills
- Compliance knowledge
- Printing and mailing logistics (if distributing physical forms)
- Recipient support
- Correction processing knowledge
Support Typically Limited To:
- Technical software issues
- Login and access problems
- Basic functionality questions
Support Usually Doesn’t Include:
- Reviewing your specific data for errors
- Compliance guidance
- Help understanding IRS requirements
- Assistance with complex scenarios
- Troubleshooting IRS rejections
What Full-Service Platforms Provide
Technology Plus Service:
- Modern cloud-based software platform
- Expert data analysts who review your files
- Data validation by experienced professionals
- Printing and mailing services
- E-filing management
- Recipient portal and support
- Unlimited corrections processing
- Compliance guidance and support
What You Provide:
- Your payee data
- Approval of final forms
Everything Else Handled:
- Data formatting and validation
- Error detection and correction guidance
- Form generation
- Quality control checks
- IRS e-filing
- State filing
- Physical printing and mailing
- Recipient inquiries
- Post-filing corrections
- Regulatory compliance
The Cost Comparison Reality
DIY Software Appears Cheaper Initially:
- $100-500 per year for software
- Seems like significant savings
Hidden Costs of DIY:
- Internal staff time (10-40 hours depending on volume)
- Staff training and learning curve
- Forms and envelopes if printing
- Postage and mailing time
- Risk of penalties ($60-$310 per form for errors)
- IT support and troubleshooting
- Correction processing time
- Recipient inquiry handling
Full-Service Reality:
- Higher per-form cost upfront
- But includes all labor, materials, expertise, and risk mitigation
- Often more cost-effective when you factor in total cost of ownership
- Predictable pricing with no surprise expenses
The Real Differentiator: Risk and Expertise
The critical question isn’t just about software features—it’s about expertise and accountability.
With DIY Software: You own all the risk. If data is wrong, forms are late, or recipients have issues, it’s your problem to solve. The software vendor provided a tool; what you do with it is your responsibility.
With Full-Service Platforms: The provider shares the risk. If something goes wrong, experienced professionals help resolve it. You’re not alone in figuring out obscure IRS requirements or troubleshooting rejection codes.
When DIY Software Makes Sense
Despite the advantages of full-service solutions, DIY software can be the right choice in certain situations:
Small Volume and Simple Situations
Ideal scenario:
- Filing fewer than 50 forms annually
- Only 1099-NEC or 1099-MISC (not multiple form types)
- All recipients in one or two states
- Clean, straightforward data
- Staff member comfortable with technology
Why it works: With low volume and simplicity, the time investment is manageable, and the error risk is lower. DIY software handles basic needs adequately.
Strong Internal Capabilities
When you have:
- Experienced accounting staff familiar with 1099 requirements
- Someone who has time to learn and manage the software
- Internal IT support for technical issues
- Knowledge of IRS e-filing requirements
- Understanding of state reporting variations
Why it works: If you have the expertise in-house, DIY software gives you the tools without paying for services you don’t need.
Desire for Maximum Control
For organizations that:
- Want direct control over every aspect
- Have compliance requirements for local data storage
- Prefer managing processes in-house
- Have seasonal staff dedicated to tax filing
Why it works: Some organizations simply prefer handling things themselves and have the resources to do so effectively.
Budget Constraints with Capability
When:
- Budget is extremely tight
- Volume is low enough to manage internally
- Staff has capacity and willingness to handle it
- Risk tolerance is higher
Why it works: If you have more time than money and possess basic competency, DIY can reduce costs.
When to Choose Full-Service Instead
For many organizations, the DIY approach creates more problems than it solves. Full-service platforms make sense when:
Volume and Complexity
You should consider full-service if you:
- File 100+ forms annually
- Handle multiple form types (NEC, MISC, INT, DIV, etc.)
- Have recipients in many states
- Process data from multiple sources
- Deal with complex payment scenarios
Why it matters: Volume multiplies the risk and time investment. One error across 500 forms means 500 potential penalties. Professional processing ensures accuracy at scale.
Limited Internal Resources
Full-service fits when:
- Your accounting team is already stretched thin
- No one on staff has deep 1099 expertise
- Tax season coincides with other busy periods
- Staff turnover means losing institutional knowledge
- You lack IT support for software troubleshooting
Why it matters: Your accounting team should focus on higher-value activities than troubleshooting form errors. Outsourcing to experts frees internal capacity.
Risk Reduction Priority
Choose full-service when:
- IRS penalties would be significant given your volume
- Your industry is highly regulated (healthcare, financial services)
- Audit risk is a concern
- Recipient complaints would damage reputation
- Compliance is critical to your operations
Why it matters: Professional processing dramatically reduces error rates. Having experts review everything before filing prevents most mistakes that lead to penalties.
Need for Comprehensive Service
Full-service makes sense if you need:
- Printing and mailing to recipients
- Recipient portal and support
- Post-filing correction handling
- Compliance guidance and support
- Someone to call when you have questions
- Data validation by experienced analysts
Why it matters: If you need more than just software, paying separately for each service (printing, mailing, support) often costs more than a comprehensive solution.
Value of Time and Expertise
Consider full-service when:
- Your team’s time is valuable
- Learning curve would be significant
- You’d rather focus on core business
- Peace of mind matters
- Professional oversight reduces stress
Why it matters: Sometimes the best use of resources is delegating to specialists. Your staff can focus on what they do best while experts handle tax compliance.
The Hidden Costs of DIY Software
Many organizations underestimate the true cost of the DIY approach. Here’s what often gets overlooked:
Time Investment
Learning Curve: Even user-friendly software requires time to learn. First-year users often spend 5-10 hours just figuring out the system, reading documentation, and understanding the workflow.
Annual Relearning: If you only use the software once per year, you forget most of what you learned. Each year involves relearning, which wastes time.
Data Preparation: Formatting your data to match software requirements, cleaning up errors, reconciling discrepancies—this can take 10-20 hours depending on volume and data quality.
Troubleshooting: When things go wrong (and they will), you spend hours researching error messages, calling support, and trying different approaches.
Total Time: Small businesses often spend 20-40 hours on 1099 processing with DIY software. At $50/hour internal cost, that’s $1,000-2,000 in labor—often more than the cost of full-service processing.
Penalty Risk
Common Errors:
- Mismatched Tax ID numbers
- Incorrect recipient addresses
- Wrong form type used
- Missing required information
- Late filing
- Incorrect state reporting
Penalty Costs:
- $60 per form if corrected within 30 days
- $120 per form if corrected by August 1
- $310 per form if corrected after August 1
- $630 per form for intentional disregard
Risk Calculation: With 200 forms and a 2% error rate (4 errors), penalties could be $240-1,260. Professional processing typically has error rates under 0.1%.
Printing and Mailing Costs
If handling distribution yourself:
- Official IRS forms or laser forms: $50-150
- Envelopes or pressure seal: $50-100
- Postage: $0.73 per form (first-class) = $146 for 200 forms
- Staff time to print, fold, seal, mail: 5-10 hours
- Materials storage and management
Total: $300-500+ for physical distribution, plus labor
Recipient Support Burden
Your staff handles:
- Questions about form contents
- Requests for duplicate copies
- Login help for online access
- Address correction requests
- Explanation of box amounts
Volume: Expect 5-10% of recipients to contact you with questions. For 200 forms, that’s 10-20 inquiries consuming staff time during busy tax season.
Software Maintenance
Your IT team manages:
- Software installation and updates
- Computer compatibility issues
- License management
- User access problems
- Data backup procedures
- Version upgrades
Even cloud-based DIY software requires user management, troubleshooting, and coordination with the vendor.
Opportunity Cost
What else could your team do with 20-40 hours?
- Month-end closing
- Financial analysis
- Strategic planning
- Process improvements
- Revenue-generating activities
The opportunity cost of DIY often exceeds the direct cost savings.
How to Evaluate 1099 Software (If You Choose DIY)
If you’ve determined DIY software is right for your situation, use these criteria to evaluate options:
Vendor Reputation and Longevity
Research:
- How long has the company been in business?
- What’s their customer retention rate?
- Are they IRS-authorized e-file providers?
- Do they have a track record of staying current with regulations?
Why it matters: Tax compliance is critical. You need a vendor that will be around next year and the year after, maintaining their software and authorization.
User Reviews and References
Look for:
- Reviews from businesses similar to yours
- Comments about ease of use
- Support quality feedback
- Complaints about hidden issues
- Success stories
Where to check:
- Capterra, G2, Software Advice
- Better Business Bureau
- Industry forums
- Direct references from current users
Pricing Transparency
Understand:
- Base software cost
- Per-form fees (if any)
- E-filing charges
- Correction fees
- Support fees
- Hidden costs
Calculate total cost: What will you actually pay for your volume? Get a written quote that includes everything.
Support Quality and Availability
Evaluate:
- What hours is support available?
- How do you contact them (phone, email, chat)?
- What’s the typical response time?
- Is support included or extra?
- Do they provide compliance guidance or just technical support?
Test them: Call with questions during your evaluation. How helpful and knowledgeable are they?
Trial or Demo Access
Before committing:
- Request trial access with test data
- Navigate the complete workflow
- Test importing your data format
- Generate sample forms
- Evaluate the user interface
Never buy software you haven’t used. Screenshots and demos don’t show you what the actual experience is like.
Data Security
Verify:
- Encryption standards for data transmission and storage
- Backup procedures
- Access controls and authentication
- Compliance certifications (SOC 2, if available)
- Data breach history and response
Integration Capabilities
Consider:
- Does it integrate with your accounting software?
- Can you export data easily?
- Are there APIs for automation?
- Does it work with other systems you use?
Scalability
Think ahead:
- Can the software handle growth in your volume?
- Are there volume-based pricing tiers?
- Does it support additional form types if needed?
- Will it accommodate new requirements?
Making Your Decision: Software vs. Service
Use this decision framework to determine the right approach:
Ask Yourself These Questions
About Resources:
- Do we have staff with time to manage this?
- Does anyone on our team have 1099 expertise?
- Can we commit 20-40 hours to this annually?
- Do we have IT support if needed?
About Volume and Complexity: 5. How many forms do we file annually? 6. How many different form types? 7. How many states are recipients in? 8. How complex is our data?
About Risk Tolerance: 9. Can we afford penalties if errors occur? 10. How important is accuracy to our operations? 11. Are we in a regulated industry? 12. Would recipient issues damage relationships?
About Value and Priorities: 13. What’s our team’s time worth? 14. Do we want to focus on core business? 15. Is peace of mind valuable to us? 16. Do we prefer expertise over cost savings?
Scoring Your Situation
DIY Software Fits Best If:
- You answered YES to questions 1-4 (have resources)
- Low volume (under 50 forms)
- Simple situations (one form type, few states)
- High risk tolerance
- Strong desire for control
- Budget is primary concern
Full-Service Platform Fits Best If:
- You answered NO to several questions 1-4 (limited resources)
- Higher volume (100+ forms)
- Complex situations (multiple forms, many states)
- Low risk tolerance
- Value expertise and service
- Time and accuracy are priorities
The Hybrid Approach
Some organizations use a middle path:
- Full-service provider for complex forms and high volumes
- DIY software for simple, low-volume situations
- Provider for first year, then evaluate DIY once comfortable
There’s no requirement to choose one approach for everything forever.
The Future of 1099 Software
Understanding where the industry is heading helps you make a future-proof decision:
Technology Trends
Cloud-Based Dominance: Desktop software is declining. Cloud solutions offer better user experience, automatic updates, and multi-location access.
Automation and AI: Expect increased automation in data validation, error detection, and compliance checking. AI will help identify potential issues before filing.
Integration Expansion: Better connections between 1099 software and accounting systems, payroll platforms, and payment processors will reduce manual data handling.
Mobile Access: Responsive design and mobile apps will enable form review and approval from smartphones and tablets.
Regulatory Complexity
Increasing Requirements: IRS reporting requirements continue to expand. More transaction types require 1099 reporting, and penalties for errors are increasing.
State Variations: State-level requirements are diverging, making multi-state compliance more complex. Software must stay current with all variations.
Shorter Deadlines: Recent changes moved certain 1099 deadlines earlier. This trend may continue, reducing the time available for processing.
Service Evolution
Blurring Lines: The distinction between DIY software and full-service is blurring. More vendors are offering middle-ground options with software plus selective services.
Embedded Expertise: Even DIY solutions are incorporating more guidance, compliance checking, and support to help users succeed.
Value-Added Services: Expect providers to offer additional services like TIN validation, recipient communication tools, and enhanced reporting.
Common Mistakes to Avoid
Learn from others’ experiences—avoid these frequent errors:
Mistake 1: Choosing Based Solely on Price Cheapest often becomes most expensive when you factor in time, penalties, and frustration.
Mistake 2: Underestimating Time Required First-time users almost always spend more time than expected on DIY software.
Mistake 3: Not Testing Before Buying Never purchase software without hands-on trial. Marketing materials don’t reveal usability issues.
Mistake 4: Ignoring Support Quality When you’re stuck on deadline, poor support is catastrophic. Test support during evaluation.
Mistake 5: Forgetting About Next Year You’ll use this software (or service) for years. Choose for long-term fit, not just this year.
Mistake 6: Not Reading the Contract Understand renewal terms, price increases, and cancellation policies before committing.
Mistake 7: Assuming “Software” Means Simple Software still requires expertise. Having a tool doesn’t make you an expert in using it effectively.
Mistake 8: Neglecting Data Preparation No software fixes bad data. Garbage in, garbage out. Data quality determines outcome quality.
Conclusion: Choose the Right Solution for Your Situation
1099 software exists on a spectrum—from bare-bones DIY tools requiring significant expertise to comprehensive cloud platforms with full service and support. The right choice depends on your specific situation, resources, expertise, and priorities.
For organizations with limited volume, strong internal capabilities, and desire for control, DIY software can provide a cost-effective solution. Focus on finding quality software from a reputable vendor, plan for the time investment, and ensure you have the expertise to handle compliance requirements.
For organizations with significant volume, limited resources, or priority on accuracy and efficiency, full-service platforms combining modern cloud technology with expert support deliver better outcomes. The higher per-form cost is offset by included services, reduced risk, and time savings.
The key is honest self-assessment. Don’t choose DIY software just because it seems cheaper if you lack the time, expertise, or tolerance for the work involved. Similarly, don’t pay for full service if you genuinely have strong capabilities and prefer managing things internally.
Whatever you choose, prioritize accuracy, compliance, and timely filing. IRS penalties are expensive, and recipient issues damage relationships. Your 1099 solution—whether software or service—should make tax season less stressful, not more.
Looking for a modern 1099 solution that combines technology with expert support? ts1099 provides a cloud-based platform with comprehensive service included. Upload your data, and our data analysts handle validation, form generation, printing, mailing, e-filing, and unlimited corrections. No software to buy, install, or maintain—just intuitive web access plus expert support.
We’ve been helping businesses since 2005, and our entire organization is SOC 2 Type II compliant. Learn more about our platform and services or contact us to discuss your specific needs.
