1099 MISC

[L.S.]

Notice below is the announcement for you to comment on the new 1099 MISC rules which go into effect in 2012. This is your chance to provide feedback on the law change and provide constructive ideas on how to implement. Of all the things we have seen over the years, this provision will effect every business in the U.S. and have a great impact on accountants, to get their clients in compliance.

I realize many of you do not always take the time to provide comments on the various issues , but I urge you in this situation to comment. You as preparers are in the unique position to help us identify the problems with implementation, IRS matching and complying with the new law.

I have gathered several comments and concerns over the last few months, I am waiting for an venue to elevate - which after this release should be soon.

See new info below on 2010 return changes and some 2011 information

The 2010 tax return will have a box for the PTIN and a box for the name of the person the PTIN belongs to. In other words you will be signing with both your name and PTIN. We will be adding this information to 92 Forms.

Form 5405 page 2 will be enabled for filing season 2011, TY 2010.

Changes to Schedule C for 2011

three lines for income before gross income

line - income

line - income reported to you from Form 1099K

line - income reported to you on Form 1099MISC

Line gross income

IRS Requests Public Input on Expanded Information Reporting Requirement

WASHINGTON — The Internal Revenue Service today invited public comment on how to most effectively carry out a law change that, starting in 2012, will require businesses to report a wider range of payments to contractors, vendors and others, usually on Form 1099. These comments will help the IRS issue guidance that implements this provision in a manner that minimizes burden and avoids duplicate reporting.

Under a proposed regulation, many business purchases made with credit or debit cards would be exempt from the new reporting requirement because they are already reported by banks and other payment processors. The IRS seeks comments on additional circumstances in which duplicate reporting might otherwise occur and on rules that would prevent such duplicate reporting.

The change, enacted in March but not effective until 2012, expanded existing reporting requirements to include a business’s payments related to goods and other property, and payments to most corporations. With some exceptions, payments to corporations are currently exempt from this requirement.

There are three ways to submit comments.E-mail to:

[email protected]. Include “Notice 2010-51" in the subject line.

Mail to: Internal Revenue Service, CC:PA:LPD:PR ( Notice 2010-51), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Hand deliver to: CC:PA:LPD:PR ( Notice 2010-51), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline is Sept. 29, 2010. Further details are in Notice 2010-51, posted today on IRS.gov.

[NECPA in NEBRASKA]

I have no idea how I am going to be able to comply to this new rule without firing clients. I am a one person office with one desktop and a laptop. I don't have or need a network and do not want to hire anyone. I am barely able to keep up with the work that I have, so I may just start looking for a job and dump my practice. I can't imagine trying to get my clients to gather all of the information that I will need just to file the new ones. I only file 1099s for about 15 clients now, but this will drag in all of my tax return only small businesses. I am just sick about this. I have written to my congressmen, but I don't think that anything will stop this mess. I will give the IRS my comments, but I'm sure that they will ignore them, since they pretty much don't care about small business owners at all.

Bonnie

[JohnH]

Step 1 would be to encourage clients to use credit cards as much as possible. One incentive for them to do so will be that their accounting fees will increase dramatically if they do business by check with a large number of vendors to whom you will have to send 1099 forms.

Step 2 is up to the client -> Once you've clearly spelled it out for the client, then it's up to them to make a rational decision. If they prefer to continue doing business by check and are willing to pay you for the work, what should that matter?

I'll have to add that I have a client who issues about 175-200 Form 1099-misc each year to certain sub-contractor vendors. I find that project to be just as profitable (or more so) than many of my regular payroll clients.

[GeneInAlabama]

Looks like for each of our accounting clients, we will have to set up a chart of accounts that includes a separate account for each vendor that is paid by check or cash. A client might write a check to a vendor for $10 in January and then in December write another check for $590. Unless we keep an ongoing account for each vendor from the very beginning, we won't know how much to write a 1099 for. How much extra are we going to have to charge our clients? How many of those clients will we keep? This is going to be a hugh headache for everyone concerned.

Oh, I guess this is going to a big boon to the credit card companies. I wonder if they had anything to do with this?

[JohnH]

I'm not saying it's necessarily a good thing or that it will always be easy, but there will be ways to deal with it. You probably wouldn't need to set up a separate account for each vendor, but sub-accounts might be needed, depending upon the accounting software. In QuickBooks, it's fairly easy to flag 1099 vendors already - just flip a switch in the vendor setup. Other software probably has similar capabilities. And I suspect all accounting software vendors will refine these options & reporting capabilities between now and 2012. The main thing you need is a means of sortg & reporting by vendor.

And of course there's always the old Excel/Access option. Any accounting software that will alllow you to export to a csv file or directly to Excel has given you all the tools you need. Just export the info, sort by vendor, and subtotal. After that, do a few tweaks for duplicates or the same company entered as different names (ABC Corp vs ABC Co, for example), and then you'll be ready to run the 1099's, I'll bet someone will come up with an Access option to do just that, if there isn't one already. Or maybe there are better alternatives already available for those who don't use Quickbooks & ATX. Currently I just export the raw QuickBooks data for 1099 vendors directly to ATX and then work from there to refine the reporting before printing the paper forms. And we haven't even touched on electronic filing of the 1099's.

[GeneInAlabama]

>>And we haven't even touched on electronic filing of the 1099's.<<

JOHN, I can't believe you said that word!

[Diane]

What about small businesses (including some of us) who are going to have to get the ID numbers for these vendors. Is that going to be an easy task or a headache?

Diane

[NECPA in NEBRASKA]

What about the business clients where we don't prepare the bookkeeping? I have around 100 that do their own books, but will still have to keep these records. It will be a nightmare for me, because they will now expect me to prepare the 1099's for them because they won't have a clue how to do it. Yes, it may be profitable, but I hate January already, because of payroll returns, 1099's, early tax returns and corporations that are ready to be prepared. I will let my clients know that if they pay by credit card, they won't have to issue 1099's for those purchases, but I will not advise them to use their credit cards more. I'm sorry, but I have clients that already have trouble paying their bills. I'm not encouraging them to go deeper in debt. This may be OK if you have employees or clerical help, but it will be miserable for those that do all of our own work.

[Lynn EA USTCP in Louisiana]

What about the business clients where we don't prepare the bookkeeping? I have around 100 that do their own books, but will still have to keep these records. It will be a nightmare for me, because they will now expect me to prepare the 1099's for them because they won't have a clue how to do it. Yes, it may be profitable, but I hate January already, because of payroll returns, 1099's, early tax returns and corporations that are ready to be prepared. I will let my clients know that if they pay by credit card, they won't have to issue 1099's for those purchases, but I will not advise them to use their credit cards more. I'm sorry, but I have clients that already have trouble paying their bills. I'm not encouraging them to go deeper in debt. This may be OK if you have employees or clerical help, but it will be miserable for those that do all of our own work.

I don't recall reading an exemption to 1099-MISC reporting if the vendor is paid via credit card. Anyone care to provide a source / citation?

Thanks,

Lynn Jacobs, EA, FNTPI, NP

Kenner, LA

[JohnH]

Yes, I did slip up and use the dreaded "e" word, didn't I?

I'll try not to make THAT mistake again.

I think the ID number issue may resolve itself for the most part. Smart vendors are going to anticipate being inundated with W-9 forms (or whatever similar form IRS produces). So I'm guessing almost everyone will begin listing their Federal ID number and Form 1099 address right on their invoices or statements - that would be the sensible thing to do. Just a little box with all the relevant info in some sort of standard format is all that will probably be needed.

As for the additional paperwork and clients who keep their own books, there's no question we will have to educate them about the new requirements. They are simply going to have to do a better job of keeping track of their purchases. They won't like it, but we don't either. They manage to keep this info on their employees, so they will have to be more diligent about it with their vendors or else pay us to clean up their mess. Maybe it will be an opportunity to add part-time help during Jan to handle this part of the load along with all the other stuff that comes rushing at us in Jan - more projects over which to spread the cost.

Or maybe there will be service-bureau type business which will spring up and who will specialize in compiling this info and producing the 1099 forms for us (or directly for our clients, perhaps cutting us out of the loop). Developing a large data base with most of the info already entered would be a good starting point, with maybe a surcharge for obtaining the info from small companies not already in the data base. I smell a business opportunity here.

[NECPA in NEBRASKA]

The service-bureau business would interest me. I always used Click-send when ATX had that available.

[Jack from Ohio]

My signature and Avatar say it all!!