Q: Am I subject to the expanded Form 1099 reporting rules which will require me to report payments to every provider of goods and services? This will be a huge burden for my small business. Am I still required to comply with these new requirements?
A: I have good news for you. For now, at least, you will not have to concern yourself with the Form 1099 reporting requirements that were to be implemented this year and next. However, you are still subject to the old rules that were in place before the laws were enacted in 2010.
The Relief – The 1099 Act
Signed into law on April 14, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (1099 Act) repeals the expanded Form 1099 reporting requirements introduced in the Patient Protection and Affordable Care Act (PPACA) and the Small Business Jobs Act of 2010 (SBJA).
The Way it Was
Before amendment by the SBJA of 2010 and the PPACA, the reporting rules generally required payments totaling at least $600 in a single calendar year to a single recipient to be reported to IRS. Reporting on Form 1099 was required only when the payor was considered to be engaged in a trade or business and had made the payment in connection with that trade or business. The type of payment that most commonly triggered the reporting requirement was payment for services.
There were a number of exemptions from the Form 1099 reporting requirements under prior law, notably including payments to corporations.
The Burden – 2010 Law
The PPACA added payments of amounts in consideration for any type of goods or property to the list of payments subject to information reporting. Also, the PPACA provided that payments to corporations would be subject to information reporting.
Additionally, the SBJA provided that a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, a landlord making payments of $600 or more to a painter or plumber would have to provide a Form 1099 to the service provider and to the IRS.
Those changes were set to create an overwhelming bookkeeping burden on small businesses and property owners.
The Way it Was Again
The 1099 Act repeals the provisions in the new rules that impose a reporting requirement for payments to corporations and payments for goods or other property. Also, the 1099 Act repeals application of the information reporting requirements to recipients of rental income from real estate that are not otherwise considered to be engaged in the trade or business of renting property.
In other words, under the 1099 Act, the information reporting rules effectively revert to the way they read before enactment of PPACA and the SBJA of 2010.
All persons engaged in a trade or business and making payment in the course of such trade or business to another person in the amount of $600 or more must report the amount, name and address of the recipient to the IRS and the recipient on a calendar-year basis.
Count on Your CPA
As you start your adult financial life, it’s a good idea to get to know your local CPA. He or she can help you understand your choices and make the best decisions for your financial future. You may contact me at (409) 892-0233 or (409) 883-5306. My email address is brad@ekc-cpa.com.
Current News
Solutions
- The Relief - The 1099 Act
- The Way it Was
- The Burden - 2010 Law
- The Way it Was Again
- Count on Your CPA
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