By Patrick J. Murphy
Buried within just 23 lines of Section 9006 of the Healthcare reform bill, The Patient Protection and Affordable Care Act, H.R. 3590, 111th Congress, signed into law by President Obama on March 23, 2010 is a dramatic change to the 1099 reporting requirements.
Prior law IRS reporting laws required, generally, that if a business made payments in excess of $600 to a person or a business over the course of a year, the business was required to file a Form 1099 to report those payments. One copy would be sent to the IRS, another copy was sent to the person/unincorporated business to whom you paid in excess of $600. Payments made to a corporation and payments made in exchange for merchandise were generally not required to be reported.
Now, beginning January 1, 2012, every business, both large and small, will be required to issue additional tax documents to any vendor of services or property to which the business has paid more than $600 to in a tax year. As before, the business will need to send the tax form to both the IRS and to the person who received payments. The Form 1099 will need to be issued for basic business expenses such as airlines, hotels, rental cars, and restaurants, according to the Small Business Legislative Council. Also, for a business who sells or distributes goods, all of their suppliers of inventory are also considered vendors under this law. This new 1099 trail would expose payments to small operators that might now be going unreported, and which the federal government expects to cause a dramatic revenue increase to offset the cost of the health bill.
In addition to issuing the Form 1099s to all its vendors, a business will also have to obtain Taxpayer Identification Numbers (TINs) from all qualifying vendors. If the business is unable to do so, the business will be required to withhold a portion of the vendor’s payment and send it instead to the IRS. If a business fails to accurately file their 1099s, significant penalties can apply. Hopefully technical corrections will be made to this legislation to lessen the record keeping and reporting burden placed on small businesses by these requirements.
07/27/10 3:00 PM
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