On page 737 of the Healthcare Bill is a three-paragraph section that has nothing to do with hospitals, doctors, drugs or health insurance. Starting January 1, 2012 all business entities will be required to issue 1099s to all individuals and business with which they spend $600 or more annually for goods and services.
Currently, businesses must file 1099-MISC forms only to individuals and unincorporated business for goods and services provided. For example, a small business contracts with an individual to design a web site for the company. The cost is $1,200 to perform the work. A 1090-MISC is issued to that contractor to insure the income is reported on that contractor’s personal tax return.
The intent of the new reporting requirements is to capture an estimated $2 billion in taxes on income that currently goes unreported each year.
So starting in 2012, if a small business purchases a computer from Staples, they will need to get Staples’ federal identification number and address in order to issue them a 1099. Same goes for the provider of their internet services, office supply company, software vendor, utility company, etc.
These reporting requirements will add a HUGE compliance problem for American businesses. Small companies, especially, just don’t have the manpower to track down the information and submit 100 or more 1099s each year. And what about all the companies on the receiving end? There is going to be a flood of 1099s pouring into Office Max, Apple, Procter & Gamble, etc. each year.
Fortunately, Representative Dan Lungren (R- Calif.) has introduced a bill to roll back this provision. We offer him our support!
Questions or Comments?
You can add comments here, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.