In 2022, Americans collectively spent 6.5 billion hours on tax paperwork. But filing taxes doesn’t have to be so time-consuming. Thanks to payroll data connectivity APIs, financial service providers are able to deliver new tax filing solutions to their customers.
Pinwheel’s latest product release supports the retrieval of W-2 and 1099 tax forms from payroll platforms, allowing our clients to develop new tax filing solutions and improve their underwriting models. Thanks to our market-leading coverage, we’re able to reach more than 80% of paid US workers across 1,600 payroll platforms.
Here’s how our latest tax form functionality supports financial service providers and tax filing services.
Powering new tax filing solutions
Easy tax filing is “the next table stakes” feature in digital banking. As financial service providers continue to ramp up their product offerings to attract new customers and retain existing ones, tax filing will become an increasingly important feature.
Pinwheel’s API makes it easier to develop tax filing solutions by simplifying the process of retrieving tax forms. Instead of asking the end user to manually provide the paperwork, they can leverage Pinwheel's payroll connectivity to seamlessly provide access to their tax documents.
Companies that already offer tax filing services also benefit from Pinwheel’s API. With the automation of the tax form retrieval process, they can make the tax filing process even more convenient for their customers.
Financial service providers that want to offer a solution for paying estimated taxes can also leverage Pinwheel’s API. Self-employed workers, like gig workers and contractors, often struggle with accurately calculating their estimated tax. This can result in IRS penalties, adding financial strain for some. By using the previous year’s tax forms, a financial service provider can estimate the tax amount a self-employed person needs to pay and take the burden off the taxpayer’s shoulders.
The tax documents are available in PDF and JSON formats to support multiple use cases and span:
Support for the JSON format means our clients will be able to skip optical character recognition (OCR) processing and get the tax documents in a format that’s ready for filing, reducing overhead.
We’ll also be looking to expand support to:
- Schedule K-1 and more
Providing another layer of income and employment data
Pinwheel already offers direct from the source income and employment data that we pull from payroll and income platforms with the user’s permission. With tax forms, we’re expanding this with another source of data, helping lenders better determine credit risk and expand their total addressable market because they have access to more data for loan underwriting.
Tax forms also play an important role in renting, as a landlord might request W-2 and 1099 forms to confirm an applicant’s income. Proptech companies that work with landlords and renters are able to use Pinwheel’s API to make these forms easily accessible during the application process. This also lowers the risk of fraud, which affected 66% of property managers surveyed in 2020.
Because of Pinwheel’s status as a Consumer Reporting Agency (CRA), our clients are allowed to use customers’ data for credit decisioning and remain compliant with the Fair Credit Reporting Act (FCRA). As the only API provider in the industry that is a CRA, we stand by our customers if there is an issue and ensure our clients are FCRA compliant.
What’s to come
The Pinwheel team is working hard behind the scenes to take our support for tax forms to the next level. While we’re focused on enabling our customers to bring new and innovative products to market, our ultimate objective is to help better the financial lives of end consumers. At the moment, we’re building two new solutions that will help us towards this goal.
First, we will give users more freedom over how they provide their tax documents. Right now, we pull tax forms directly from a user's payroll account. However, these documents are not always natively available in digital format. We will enable the user to upload their tax forms, expanding support to all customers — regardless of their payroll or income platform.
Additionally, we want to put more money into the pockets of workers today. In 2022, the average tax refund was $3039, which amounts to roughly $253 per month that could go toward monthly expenses rather than receiving a lump sum return in April. To address this problem, we're working to enable W-4 adjustments to put that money back into the users' pockets throughout the year.
If you’re ready to discuss how Pinwheel’s API can enhance your product, get in touch with us today.