Friday, August 06, 2010
Urge Congress to Repeal Burdensome 1099 Reporting
It’s worse than you think. And once you understand how bad the expanded 1099 reporting requirements will be for your business, you will demand that Congress repeal them.
Current law generally requires that a Form 1099 be filed for purchases of services over $600 during a calendar year – typically from small contractors and vendors. One of the mechanisms used to pay for the new federal health care law was an expansion of 1099 filing requirements to goods purchased, and purchases from corporations, starting in calendar year 2012. This new law will greatly increase administrative costs for businesses, result in hundreds of millions of new 1099s, and cause the following problems:
- Businesses will need to have record keeping systems in place by January of 2012 that allow for the tracking of all purchases by vendor Tax Identification Number (TIN).
- Businesses will need to obtain a TIN from a vendor at the time of making a purchase if there is a possibility that your total purchases could exceed $600 during the year. Think of the nightmare this will cause when buying a computer, office supplies, inventory, gasoline, etc.
- If a vendor fails to provide you their TIN, you are required to withhold 28% of the purchase price in backup withholding and annually remit the funds to the IRS.
- The 1099s must be provided to the IRS starting in January of 2013, with a copy sent to the vendor. Businesses filing over 250 1099s with the IRS must do so electronically.
- Businesses receiving 1099s should reconcile them to their records for accuracy. Businesses filing or receiving 1099s are likely to receive additional correspondence from the IRS if the data filed differs from their records (missing data, non-match of name and TIN, 1099 income not reflected on tax return, etc.).
- Businesses that fail to issue the required 1099s or perform backup withholding will receive penalties from the IRS.
- Payments to business entities that are tax exempt will not require a 1099. IRS Commissioner Doug Shulman has also stated that he may administratively exempt from 1099 reporting payments made by businesses through credit or debit cards, since these are separately reported by financial institutions.
While your Congressman and Senators are on the campaign trail, now is the perfect time to demand that they co-sponsor pending legislation (S. 3578 and H.R. 5141) to repeal the burdensome 1099 reporting requirements (only Rep. Bartlett is currently a co-sponsor). Do not accept excuses that this “revenue source” must be replaced (to pay for a health care bill we opposed) or that similar legislation recently died in the House (H.R. 5982 was a partisan attempt to impose more tax increases). See more information on this issue from the Maryland Association of CPAs here.
Contact your Senators and Representative today and urge them to repeal the burdensome 1099 requirements.
Contact Ron Wineholt for further information at .(JavaScript must be enabled to view this email address).
