Changes in 1099 reporting rules

[kcjenkins]

The passage of the Healthcare reform bill included some of the most drastic changes to 1099 information reporting in over a decade. The bill included revenue raising provisions meant to seek greater compliance of the tax code via 1099 information reporting. General provisions included:

Ø The elimination of the corporate exemption from 1099-MISC reporting. (Public Law 111-148)

Ø The requirement to report payments for property (goods, materials, merchandise, supplies, etc.). (Public Law 111-148)

Ø A six-fold increase in penalties from $250,000 to 1.5 million. (H.R.4213, H.R.4849)

Ø A doubling of penalties per record from $50 to $100. (H.R.4213, H.R.4849)

Beginning for payments made after December 31, 2011, companies will be required to furnish and file form 1099-MISC for payments made to all for-profit companies regardless of corporate status. In addition all payments for goods, materials, merchandise, supplies, and other property will need to be reported as well. Early indications reveal that these changes will likely cause the 1099 reporting volume to increase significantly for most companies as well as the associated B-Notices. [You think?????]

While the law applies to payments made after December 31, 2011 companies need to make broad changes to:

1) W-9 procedures to include all vendors.

2) Solicit W-9's for corporate vendors.

3) Prepare for larger 1099 year-end printing, mailing, and filing.

4) Make the appropriate budgetary and system updates to accommodate these changes.

[BulldogTom]

Wow, I missed that part of the bill. Job Security.

Tom

Lodi, CA

[kcjenkins]

Yep, we're going to have to get people started on sending out W-9s to basically EVERYBODY. And let them know that the penalty is $100 for EACH form not sent. Hey, maybe this is the Congress's way of trying to help the post office stay in business?!? There is no logical justification for putting this huge burden on every business, just to make them unpaid employees of the IRS, but hey, they passed it. It's now the law, unless we get enough of them fired in Nov to get it changed before it goes into effect. The biggest burden, from a practical point of view, will be on the small business, where they do not have lots of employees to handle such profitless paperwork.

Think about that "all payments for goods, materials, merchandise, supplies, and other property will need to be reported as well." That means you're going to have to keep up with how much you paid Office Max, Staples, your printer, Fed-Ex, UPS, etc. Not just the total amount for office supplies, but how much to each company.

I guess, although I am not certain, that we will not have to send one to the Post Office. Are payments to quasi-government entities exempt? It says 'for-profit' businesses, and while the PO does not make a profit, it was, a few years back, changed from a pure government agency into what was supposed to be a profit-making entity. Maybe we better send them one too, to be safe?