Major changes in 1099 Reporting and Compliance - Health Care Reform Bill
If you thought that health care reform was only about reforming health care, think again. Buried on one page among thousands in the recently passed health care bill is Section 9006- a sweeping change to tax reporting and compliance requirements that will affect every corporation in United States.
The scope of form1099 has been considerably extended by Section 9006 Expansion of Information Reporting Requirement of the 2010 health care reform bill (The Patient Protection and Affordable Care Act) http://democrats.senate.gov/reform/patient-protection-affordable-care-ac...
Section 9006 of health care bill mandates that beginning on 2012 all companies (other than a payee that is a tax –exempt corporation) will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods and services in a tax year. This will include any inventory, material, equipment or merchandise.
For example - In year 2012 your business spends $ 750 at a local restaurant for an employee dinner. The restaurant is operated by a corporation. Under the new rules scheduled to become effective that year, the $750 must be reported on a Form 1099.
The new law contains two separate provisions eliminating exemptions that have applied to 1099 filings, first it expands their scope by using them to track payments not only for services but also for tangible goods such as computer, equipment, office supplies, and just about any thing else you can put your hands on and secondly it required 1099s to be used not just to individuals but also to corporations.
For example - In year 2012 your business spends $ 750 in an office supply store, pays an individual $850 for old equipment, all these transactions will require your business to issue 1099s.
These two important changes will require millions of additional forms, data collection, gathering names and tax payer identification numbers for every payee, vendor that you do business with and extensive record keeping and paper trail to throughout the year.
In essence, the1099-Misc is having its role changed from a form for tracking off-payroll employment to one that must accompany virtually any business transaction of over $ 600 in a tax year.
The final impact of this law won’t be known until the IRS issues its regulation on new law specifying how the provision will be implemented, which is not expected to arrive until some time next year.
Plan for filing the 1099-Misc. forms. In QuickBooks, you can set up a vendor as a 1099 vendor. To get the correct taxpayer identification number and address, please ask your vendors to provide you with a signed W9 form http://www.irs.gov/pub/irs-pdf/fw9.pdf.
If you choose to file on your own, you must use the printed form available from office supply stores or online. Please note that you cannot print the PDF form from IRS on your computer and submit them.
We at Indevia Accounting (www.indevia.com) stand ready to help you with your accounting needs including timely submission of tax forms.
Prepared by Dilip Maheshwari Senior Manager, Indevia Accounting Inc. www.indevia.com Readers are encouraged to share this article with attribution to the author.
*This article is provided as a matter of general interest. It is not an expert opinion. The author strongly encourages readers to consult their professional adviser for questions arising out of this article.
