1099 for everything over $600 a year!
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 estimated that establishing additional 1099 paper trails for income could provide up to 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.
Comments (10)
I read recently where congress tried passing items in the Cap and Trade bill that would make home ownership even less attractive. It seems the govt is declaring war on business owners during an economic downturn. Nothing the govt is doing makes any sense, unless the goal is to destroy the economy...
Tom Bukacek, almost 14 years ago
I thought there wasn't going to be a tax on 95% of the population! I guess it depends on what your definition of tax is...sounds Clintonisque to me!
Bryan Hancock, almost 14 years ago
I just read in Forbes that they have found a way to tax S Corps. And they're using the justification for tax increases as 'closing tax loopholes'. So the govt is bringing in all sorts of money from business owners with new taxes, but calling it something else instead of new taxes. Unflippinbelievable!
Tom Bukacek, almost 14 years ago
Nothing like more bureaucracy! Like I don't pay my legal and accounting professionals enough already!
Bryan Hancock, almost 14 years ago
Really?!?! No Really!!! I have enough paperwork in my life - I am with Tom - let's go get em!
Alison Feliciano, almost 14 years ago
Thanks for the post and to Bill for the update. Interested in details from Bill on status of legislation to recind. This is a semi ridiculous administrative burden.
Ted Akers, almost 14 years ago
Incredible! How much more paper work will they demand of us?
Tod R., almost 14 years ago
Bill, that would be great news. Do you know the proposed legislation so we can contact our Legislators? I'd love to influence
Tom Bukacek, almost 14 years ago
Thankfully, some folks in Washington have actually considered the administrative burden this is going to place on small business owners - including real estate investors!! Although the IRS has yet to issue final regulations on the new law specifying how the regs will be implemented there are moves in congress to repeal the new 1099 requirements. Legislation has been introduced and has garnered more than 50 House cosponsors. Hopefully others will join in before the 2012 enactment.
Bill Walston, almost 14 years ago
Small businesses are going to have that much more to do at year end. Having filed many 1099s in the past, I doubt seriously that this will accomplish the stated goal. It is more of a way of helping the IRS in an audit.
Account Closed, almost 14 years ago