1099 for everything over $600 a year!
Wednesday, May 26
Part of the Health Care Reform Act:
Starting in 2012, all business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing.
Until now, payments to corporations have been exempt from 1099 rules, as have payments for the purchase of goods. Now you will have to obtain the taxpayer ID number of the individual or corporation you're making the payment to -- even if it's a giant retailer like Staples or Best Buy -- at the time of the transaction, or else facing IRS penalties.
Just with business travel it would include hotels, rental cars, says the IRS. Phone service: 1099. Computer service: 1099. Whoever does your postage meter: 1099. You do a little advertising, Yellow Pages: 1099. Your landlord: 1099. You might as well just keep them in your pocket and hand them out as you go around every day.
Credit card merchant accounts, Pay Pal, and Amazon will be required to send 1099-K forms to you and the IRS as well.
Why did this come about, especially in the Health Care Bill? Apparently back in 2007, the Senate Finance Committee asked the government's General Accountability Office to conduct a tax-gap study. The resulting report estimated that establishing additional 1099 paper trails for income could provide up to $345 billion annually in new federal tax revenues.
On average, small businesses fill out about 10 1099k forms per year. It is projected that extending 1099s just to services purchased from corporations would push that number to at least 200 filings per year for a typical small business -- adding an estimated $6,000 to the cost of preparing the average tax return.