Although the paper shortage received some attention during the recent midterm elections, another paper-intensive process - printing and shipping year-end tax forms - is just around the corner.
Paper joins an extensive list of resources that have been in short supply at some point due to the pandemic. Although it seems like COVID-19 is in the rearview mirror, some long-lasting effects are making waves today. Pandemic policies, labor shortages, and rising prices created a perfect storm that left paper mills in a severe bind. The world is now suffering from a paper shortage, and it does not look like it will be resolved anytime soon.
If your organization plans to distribute paper tax forms this year, it is essential to start planning now. The paper shortage is significant enough to threaten your company's ability to meet the filing deadline.
Forget printing year-end forms! Avoid any headaches at your year-end by taking advantage of our field-tested solutions and e-file with Greenshades. Learn more here.
Why is this happening?
When COVID-19 hit, paper mills and manufacturers had to make tough decisions to keep their businesses afloat. Then, as the world came out of lockdown, paper mills faced additional challenges like labor shortages and inflation that kept their production behind pre-pandemic levels.
1. Mills Converted to Producing Packaging Materials
People stuck at home during the lockdown started shopping online for about everything, causing e-commerce sales to increase by 43% in 2020.i As such, many paper manufacturers saw an opportunity to pivot into making shipping supplies. Producing cardboard and other packaging materials was lucrative for many companies struggling to maintain operations in difficult pandemic times.
2. Demand Increased Too Fast
In spring 2021, paper demand returned at an alarming rate – and suppliers were not ready. First, mills could not get enough workers back on the production floor to meet demand. Then, manufacturers could not find enough transportation workers to get their products to consumers. People started to order in bulk when they first got wind of a possible shortage, which worsened matters.
3. Production Costs Increased
Inflation hit the paper industry hard and forced many mills to reevaluate their production process. A 40% increase in the cost of raw pulp used to make paperii and rising oil and transportation prices significantly impacted their business processes. The additional costs forced mills to cut back on production or even cease operations.
What does the future hold?
The paper-producing industry struggled before the pandemic, and it is not likely that their challenges will be eased any time soon.
- From 2012 to 2020, the market size of US paper mills fell by 36.5%.iii
- In 2017, IBISWorld predicted that paper mill manufacturing would see a 3.1% annualized economic market decrease over the next five years.iv
- From 2015 to 2019, production of regular printing paper decreased from 101 to 92 million tons, and it is forecasted that only 72 million tons will be produced in 2022.v
The outlook for the paper industry is bleak. Government officials are currently preparing for the chance that there will not be enough paper ballots for the 2024 election.vi
How will this impact you?
The current paper shortage will significantly impact the 2022/23 year-end process. Finding enough paper to print your organization's tax forms will take a lot of work, and it may be challenging to find adequate supplies in time to meet the deadline. In 2021, 22% of all filings to the IRS (Internal Revenue Service) were done via paper,vii so there will be competition for these limited resources. Additionally, the price of paper increased 9.7% in 2021, and prices are still going up today. Therefore, a year-end process completed on paper will be costly.viii
A reminder of critical deadlines:
By January 31st:
- Forms W-2, W-2AS, W-2CM, W-2GU, W-2VI, W-3, and W-3SS due to the SSA (Social Security Administration) (paper or electronic)
- Form 941 (employers’ quarterly federal returns) and 1099-NEC forms due to the IRS and recipients
By February 15th:
- Forms 1099-MISC, 1099-B, and 1099s with only box B and 10 due to the recipient
By February 28th:
- If filing on paper - forms 1099-B, 1099-S, 1099-MISC, 1099-B, 1099-S, 1099-S, 1099-DIV, 1099-INT, 1099-R, 1098, 1098-C, and 1099-MISC, and ACA (Affordable Care Act) forms 1094-C, 1095-B, 1095-C without NEC due
By March 31st:
- If filing on paper - forms 1094-C and 1095-C due to the IRS
- If e-filing - forms 1099-MISC, 1099-C, 1099-DIV, 1099-INT, 1099-R, 1098, 1098-T, ACA forms 1095-C, 1095-B, and 1094-C due to the IRS
April 18th is the tax deadline!
Using the Power of Greenshades
If your company is having difficulty getting W-2s or 1099s for this year-end, Greenshades has you covered. Greenshades worked hard to find enough paper to meet the demands of our customers this year. We can help you print and mail the forms you need, or you can leverage the Greenshades portal to post digital versions for your employees. Whether you currently use Greenshades services or not, your team can harness the power of our streamlined year-end service.
References:
i Brewster, Mayumi. 2022. “Annual Retail Trade Survey Shows Impact of Online Shopping on Retail Sales during COVID-19 Pandemic.” Census.gov. April 27, 2022. https://www.census.gov/library/stories/ 2022/04/ecommerce-sales-surged-during-pandemic.html.
ii “Where Is the Paper Market Headed in 2022?” 2021. IWCO Direct. December 10, 2021. https://www.iwco.com/blog/2021/12/10/ where-paper-market-is-headed-2022/.
iii Cohen, Anya. 2017. Review of Paper Jam: Foreign Competition and Declining Demand for Paper Will Plague Industry Mills. Wisconsin Public Radio. IBISWorld. https://www.wpr.org/sites/default/files/ 32212%20Paper%20Mills%20in%20the%20US%20Industry%20Report.pdf.
iv Ibid.
v Wallin, Rodney. 2021. “Commercial Paper Market Trends: What’s the 2022 Outlook.” PCI Group. December 21, 2021. https://pcigroup.com/paper-market-trends-whats-the-outlook-in-2022/.
vi “Preparing for Ballot Paper Shortages in 2022 and 2024 | Bipartisan PolicyCenter.” n.d. Bipartisanpolicy.org. Accessed November 17, 2022. https://bipartisanpolicy.org/report/ballot-paper-shortages/.
vii Rettig, Charles, Barry Johnson, David Paris, Michael Weber, and Wayne Kei. 2022. Review of Internal Revenue Service Data Book, 2021. IRS.gov. Internal Revenue Service. https://www.irs.gov/pub/irs-pdf/p55b.pdf.
viii “IBISWorld - Industry Market Research, Reports, and Statistics.” n.d. Www.ibisworld.com. Accessed November 21, 2022. https://www.ibisworld.com/us/ bed/price-of-paper/4595/#:~:text=Overall%2C%20the%20price%20of%20paper.
