The annual 1099 filing season presents unique challenges for title insurance professionals, requiring a blend of accuracy, timeliness, and a commitment to safeguarding sensitive information.
To navigate these complexities, industry experts Lea Johnson, director of accounting at Proper Title, and Allison Roth, director of closing operations at Proper Title; and L.T. Elliot, vice president of support services at SoftPro, offer practical strategies and insights on compliance, efficiency, and client service.
Adapting to updated IRS guidelines, best practices
The 2024 tax year introduced stricter penalties for late or inaccurate filings of 1099 forms, prompting title insurance companies to refine their processes.
“The most significant changes for 2024 are the penalties for late or incorrect filing of 1099 forms,” Johnson told The Title Report. “Fines for failing to file on time, or for filing incorrect information, have been raised. For us, this change means more emphasis on timeliness and accuracy when preparing and filing 1099 forms.”
Proper Title employs automated tools and a rigorous review process to ensure compliance with IRS deadlines and reporting standards.
“To ensure accurate and timely submissions of our 1099 detail, we utilize automated workflows and reporting within our title and escrow software, SoftPro,” Johnson explained. “We review exemptions and exclusions, as well as duplicate entries, quarterly. Internal cross-checks are completed, and any discrepancies are investigated and corrected promptly. At year-end, we complete a final reporting review and e-file our 1099 forms for efficient submissions.”
Roth highlighted the collaborative efforts between departments, adding, “Our accounting team does a quarterly review of files to ensure items have been entered into our system correctly. They provide any files showing as incomplete or containing errors to the escrow team, and the escrow team works to ensure the information is entered correctly. Our accounting team is diligent about working with the escrow team to ensure all reporting is entered and submitted to the IRS by their required deadlines.”
Elliot said that communications are sent by SoftPro to 1099 clients containing deadlines, user guides, how-to videos, and monthly webinars between November and March.
“Our Pro1099 module automates the preparation of 1099-S records for electronic submission to the IRS FIRE site,” he said. “It allows a user to store all their 1099-S data throughout the year and enter the 1099-S data directly into the program. The data is automatically sent from their orders to Pro1099.
“The user is notified of any discrepancies in the file while they are working on the closing. Additionally, SoftPro’s Pro1099 product offers many reports to indicate missing or erroneous 1099 information. Once the user has completed the 1099 process, they are ready to file their 1099 Information Returns (IRSTAX file) to the FIRE system before the March 31 deadline.”
Title management platform provider AccuTitle polled industry experts and customers to narrow down the best strategies to ensure a smooth 1099-S process. Results included:
- Appointing a 1099-S lead: Designate a “quarterback” to oversee the year-round 1099-S process. This person should create a plan, ensure deadlines are met, and manage seller data collection and validation.
- Gathering information early: Before closing, collect all required seller details, including tax IDs, mailing addresses, and exempt status. It is much easier to contact the seller during the process than it is to get their attention afterward.
- Validating tax IDs: Use tax ID validation tools before closing or IRS submission. This prevents costly inaccuracies and avoids the appeals process, saving time and effort.
- Early distribution: Spread the workload by mailing 1099-S forms to sellers quarterly or provide them at the closing table. Early distribution reduces the January rush and gives sellers time to identify and report inaccuracies.
- Using a vendor: Partner with a vendor to handle reporting, printing, and mailing.
Handling post-closing document requests
Tax season often brings an influx of requests for duplicate closing documents. Proper Title prioritizes client service while maintaining strict security protocols.
“All closing documents are provided to our clients at the time of closing,” Johnson said. “However, any document requests we receive post-closing are prioritized with our usual ‘blue-glove service.’ By verifying identities thoroughly, tracking requests, using secure document-sharing platforms, and educating clients on fraud risks, we ensure that requests are handled efficiently and securely. This builds trust and confidence with our clients and customers, during tax season and beyond.”
Roth said she and Proper Title colleagues provide a copy of the 1099-S to the seller and/or their attorney at the closing table.
“If the seller is not at the closing, we either provide a copy by mail or electronically via a secure email,” she said. “We also mask the Social Security Number number on the 1099-S provided to the client so (nonpublic personal information) is protected. By providing a copy at closing, it eliminates the bulk requests for copies during tax season.”
Elliot said SoftPro support assists customers in several ways to help them retrieve documents that buyers and sellers have requested.
“One of the best practices we recommend is running the 1099-S Record Listing report and exporting it to Excel,” he said. “This report allows the user to sort and filter to review for duplicate closing order numbers. This export can be sorted by seller name, Social Security Number/tax identification number, legal description, and settlement date.”
When additional requests do arise, Roth emphasized Proper Title’s thorough vetting process.
“If someone calls asking for a copy of their 1099 from closing, we ask them questions about their role in the transaction and other details only the seller would know,” she said. “If another party calls for a copy, we let them know we are unable to provide the information to them due to our policy and procedures designed to protect NPI.”
Roth emphasized the trust clients place in their handling of sensitive information.
“Our diligence in protecting customers’ NPI is something that I know our customers expect and appreciate,” she said. “We take our role in protecting personal information very seriously.”
Conclusion
As title insurance professionals adapt to evolving IRS guidelines, a roadmap for ensuring compliance, enhancing efficiency, and maintaining strong client relationships will remain paramount across the industry.
“Our approach combines advanced tools, thorough reviews, and a commitment to client service,” Johnson said. “By prioritizing accuracy and security, we can meet the challenges of 1099 filing while continuing to build trust with our customers.”
Roth summed up their philosophy, stating, “Ultimately, it’s about balancing efficiency with personal service. Our goal is to make the process as seamless as possible while safeguarding the sensitive information our clients entrust to us.”