An author, Melanie, wrote to me asking about an upcoming tax reporting requirement:
I remember when ObamaCare passed that they also passed an amendment to the IRS regulations requiring you to issue 1099s to anyone to whom you made a payment of more than $600, including suppliers. Do you know if we need to do that for this year or will it start later? (Or hopefully, be repealed)
Thanks for your help,
Well, Congress tried twice to overturn this 1099MISC requirement that was a part of the Patient Protection and Affordability Act (ObamaCare), but neither attempt succeeded.
I learned the details about one of the bills to overturn the reporting requirement and it was more complicated than the original! It had different dollar thresholds based on the type of transaction and an exemption if a credit card was used (bu no mention of a debit card!). I was imagining some of my small business clients dealing with all of that in their QuickBooks programs! Ugh!!!
As of today (Jan 3, 2011), all businesses will be required to send 1099MISC forms to all suppliers including corporations for payments made beginning Jan 1, 2012.
That means that in 2012, you will need to collect W-9 forms (that request legal names and SSNs or EINs) from every business that you purchase more than $600 in goods or services. This means even corporations like a hotel chain or Office Depot!
You have all of 2011 to get your record keeping in place. Make sure that your accounting system is keeping track of payments issued to specific vendors, contractors, and other businesses. Track the name, address, and taxpayer identification number of the vendor. Make sure that your accounting system can separate payments made by credit or debit card from payments made by cash or check. QuickBooks can do all that if you or your bookkeeper enter in all the information as each bill is paid.
Fortunately, the new Form 1099 reporting rules don’t cover payments made before 2012. So there’s still plenty of time to plan for what is likely to be a daunting task…use it wisely!
By the way, I wrote to each of my US senators about this onerous reporting requirement and explained that it was an unnecessary burden on small businesses. Both of my senators now say they oppose the reporting requirement and will work to overturn (or amend) it.
Carol Topp, CPA