Form 1099 Reporting Requirements
The Form 1099 reporting requirements, included as a "payfor" in the Patient Protection and Affordable Care Act, will require the tracking of payments for goods and services as well as for payments to corporations and individuals.
"In particular, businesses will have to issue Forms 1099 for goods purchased after 2011, regardless of the corporate form of the vendor," National Taxpayer Advocate, Nina Olson, stated. "The Office of the Taxpayer Advocate is concerned that the new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance."
Prior to the signing of the Patient Protection and Affordable Care Act in March 2010, payments to corporations were generally exempt from the Form 1099-MISC filing requirement as was the reporting of the purchase of goods. Starting in 2012, business payments to a single entity of $600 or more, including corporations and payments for the purchase of goods, will be required to be reported on Form 1099-MISC.
This change in the law will significantly increase the forms required to be fi led by each business. Do you spend $600 or more at Office Depot? You'll need to get their employer identification number so you can send them Form 1099-MISC. Do you spend $600 or more with American Airlines? Same deal.
"This will add an untold number of 1099s to the mix, and it's going to be a record keeping burden for the purchaser," said Benson Goldstein, senior technical manager at the American Institute of CPAs. "What if they have multiple locations, and the purchaser is buying from many different vendors? There's a lot to be worked out, but it will be a very burdensome task not only for the business community but also for the IRS itself."
The provision would apply to businesses of all sizes, charities and other tax-exempt organizations, and government entities, Olson noted. These would include 26 million non-farm sole proprietorships, 4 million S corporations, 2 million C corporations, 3 million partnerships, 2 million farming businesses, 1 million charities and other tax-exempt organizations, and probably more than 100,000 federal, state and local government entities, according to the report.
The good news is that many influential people in the Obama administration and Internal Revenue Service have acknowledged the tremendous burden this would cause small business, the government, and taxpayers. Repeal of this law is in the works but it is not guaranteed.
