In an article from the RIA Special Study: Non-Health Related Revenue Raisers and Other Tax Changes in the New Health Reform Law (04/01/2010) Federal Taxes Weekly Alert Newsletter, they referenced an little known provision of the new healthcare bill. They have enacted new rules for the Form 1099-MISC effective for payments made after 12/31/2011.
The following is from the above referenced article:
Information Reporting Required for Payments to Non-Exempt Corporations
In general, all persons engaged in a trade or business must file with IRS an information return for payments made to another person in the course of the payor’s trade or business that constitute fixed or determinable income aggregating $600 or more in any tax year. Payments are those for: salaries, wages, commissions, fees, and other forms of compensation for services rendered amounting to $600 or more in a tax year; and interest, rents, royalties, annuities, pensions, and other gains, profits, and income amounting to $600 or more in a tax year. The payor is also required to provide the payment recipient with an annual statement showing the aggregate payments made and contact information for the payor.
Payments made to corporations and certain other types of entities are generally excepted from these information reporting requirements by Reg. § 1.6041-3(p)(1) . Nevertheless, the following types of payments to corporations must be reported: (1) medical and health care payments of at least $600; (2) fish purchases totaling at least $600 cash; (3) attorney’s fees (of any amount); (4) gross proceeds paid to an attorney of $600 or more; (5) substitute payments in lieu of dividends or tax-exempt interest (of any amount); and (6) payments by a Federal executive agency for services (for contracts exceeding $25,000).
New law. For payments made after Dec. 31, 2011, notwithstanding any IRS reg issued before Mar. 23, 2010, for information reporting purposes, “person” includes any corporation that is not exempt from tax under Code Sec. 501(a) . ( Code Sec. 6041(h) , as amended by Health Care Act Sec. 9006(a)) Thus, a business must file an information return for all payments aggregating $600 or more in a calendar year to a single payee (other than a payee that is a tax-exempt corporation), notwithstanding any reg promulgated before Mar. 23, 2010.
This information-reporting provision will increase the amount of paperwork by businesses and farms. It looks like the days of doing your bookkeeping by hand is coming to an end after 12/31/2011. Unless, you want to track payments to each vendor by hand…
November 1, 2010 at 8:32 am
Good blog. I was just wondering if you had heard about the rules being pushed up from the requirement starting after 12/31/2011 to the requirements being started after 12/31/2010. Thank you.
November 12, 2010 at 3:50 pm
I keep noticing mentions in various articles/blogs of collecting TIN information for every vendor that a company does business with. Should companies also collect TIN’s (W-9 forms) from governmental agencies (ie- State of xxxxx, Dept of Revenue) too as a best practice? Just curious what others were doing. Thanks.
December 22, 2010 at 4:10 pm
You gotta be kiddn’ me. This is a catastrophe for both small and large businesses. Who’s gonna tell everyone that they need to give everyone their social security numbers to everyone and that they will all be secure.
Renee
January 10, 2011 at 12:22 pm
I want to help repeal this 1099 ruling.
Keep me informed and advise what I can do (besides obvious protests to senator/rep)
I’m a small business owner that fights to
stay afloat…
Tanya and Brian Grothe
Aircraft Turbineworks, Inc.
Ft Pierce, FL
St Lucie County
January 13, 2011 at 1:15 pm
I have been looking for this information. At a tax meeting we were led to believe this started NOW. Thanks for the help/relief.
January 24, 2011 at 4:35 pm
I’m not sure if I’m missing something here or not. I work for three corporations, and all three use quickbooks. This year I only had to make out 5 1099-misc all togeather, (most of the venders I pay are corporations themself) and quick books did all the work for me. Is there more “venders” then in the past that will need a 1099, or is it just for the people who still do them by hand that this will be a head acke for?
January 24, 2011 at 5:41 pm
It will be a headache for everyone. As it stands right now, any vendor by which you pay via check or cash >$600 in a year you will have to send a 1099. The last I heard they might exempt credit card payment since they will be reported to the businesses via a new 1099-K.
Which makes the headache even worse because now you would not only have to track to whom you made payments but how they are paid. At the end of the year you would then need to backoff the credit card payments from the total amount paid throughout the year so that amounts are not reported to the business twice. Once by you and once by the credit card companies.
In other words, your going to need a lot of red forms and hope your software figures out a way to handle the different payments. Lets just hope this provision gets repealed.
February 8, 2011 at 6:23 pm
So If I understand this correctly. If I a sole proprietor purchased a computer from Dell in the amount of $700 on 1/2/2012 I would have to issue Dell a 1099?
February 14, 2011 at 4:46 pm
Correct, that would be a purchase of a product greater than $600 annual threshold.
February 14, 2011 at 4:37 pm
Wait…does this mean that we now have to file 1099s for GOODS purchased totaling over $600, not just SERVICES RENDERED???
February 14, 2011 at 4:45 pm
That is correct if implemented it will be for products and services.
February 14, 2011 at 5:06 pm
Will there still be an exemption for Tax Exempt Organizations and Gaming…. ie, BINGO rules?
February 14, 2011 at 5:08 pm
Not sure, as I have not researched that side yet. My initial response would be no, as tax exempt organizations currently are required to file 1099-MISC’s for contract labor.
February 14, 2011 at 5:11 pm
Still researching… It may reduce our patrons if they are required to give out SSN for winning a Bingo.
January 6, 2012 at 3:46 pm
My CPA informed me that I must have form 1099′s filed by 1/31/12 for any work performed by ANY service people (corporation or not) exceeding $600 in payment during the year 2011. We own rental property (not a large corporation) but use a lot of outside maintenance and service people.