Search
Certified Public Accountants
& Business Consultants

Focus on Taxation: New Rules For 1099 Reporting

Contact Our Team

A little known Section in the Health Care Reform Act of 2010 will change the face of 1099 Information Reporting. Section 9006 of the Patient Protection and Affordable Care Act mandates 1099 reporting for services AND goods purchased in excess of $600 for all payees other than exempt organizations. The new law includes corporations that under current regulations are generally exempt from receiving a Form 1099.
December 15, 2010

A little known Section in the Health Care Reform Act of 2010 will change the face of 1099 Information Reporting. Section 9006 of the Patient Protection and Affordable Care Act mandates 1099 reporting for services AND goods purchased in excess of $600 for all payees other than exempt organizations. The new law includes corporations that under current regulations are generally exempt from receiving a Form 1099.

Current regulations require reporting for services, but not payments for property.

The new law would require 1099s to be issued for gross proceeds paid for property and purchases of goods, as well as services. The new rule is effective starting in 2012.

Why did Congress include this change in the health care bill when it is obvious it will result in increased administration for businesses purchasing goods and services? The additional reporting required by the new law is projected to increase compliance and capture unreported income that can be used to offset the cost of health care reform.

The IRS is currently inviting public comment on how to most effectively carry out the new law. You may submit your comments by:

    Email
    Notice.Comments@irscounsel.treas.gov.
    Include “Notice 2010-51" in the subject line

    Mail
    Internal Revenue Service
    CC:PA:LPD:PR ( Notice 2010-51)
    Room 5203, P.O. Box 7604
    Ben Franklin Station
    Washington, DC 20044

    Hand Deliver
    CC:PA:LPD:PR ( Notice 2010-51)
    Courier’s Desk
    Internal Revenue Service
    1111 Constitution Avenue NW
    Washington, DC
    Monday through Friday, 8 am - 4 pm

The deadline for submission of comments is September 29, 2010.

Compliance

Businesses should take the necessary steps to ensure they are prepared for these new reporting requirements. Developing policies and procedures for capturing and reporting 1099 information will make compliance with the new law less of an administrative burden to businesses.

The following are suggestions that businesses can utilize to develop improved policies and procedures for reporting 1099 payments:

  • Require a signed Form W-9 from all vendors before remitting payments
  • Verify accuracy of W-9 by becoming a user of IRS e-services. An enrolled taxpayer can participate in the free Taxpayer Identification Number (TIN) matching program. The program allows participants to check the TIN furnished by vendors against the name / TIN combination contained in the IRS database.
    • To participate in TIN matching, click here.
    • Participation in this program will help prevent penalties and B Notices from the IRS. Utilizing this service will also make it easier to comply with the additional reporting requirements if they are not repealed.
  • Update internal software and administrative processes used to prepare and process 1099s.
  • Be aware of filing requirements of the information returns:
    • Federal – If you are required to file 250 or more information returns, then you must file electronically.
    • Missouri – Forms can be filed on paper or by magnetic media reporting. For more information visit the Missouri Business Portal website.
    • Kansas – Payees filing 51 or more 1099s will file electronically. 
    • Illinois – There is no requirement to submit Form 1099s to the state of Illinois.
    • Colorado – Colorado follows the Internal Revenue Service guidelines for reporting of information returns. To report 1099 statements for entities with more than 250 payees, use the IRS format 1220. Send only 1099 statements listing Colorado withholdings. Specifications are available on the IRS website. Only diskette and CD-ROM submissions are accepted. Less than 250 payees can file paper statements sending only 1099 statements that list Colorado withholdings.

Missouri and Kansas participate in the Combined Federal/State Filing (CF/SF) Program where the IRS will forward original and corrected information returns filed electronically to participating states for approved filers. Approval is obtained through the Internal Revenue Service Filing Information Returns Electronically (FIRE) system.

Current Developments

Legislation has been introduced that would repeal the new requirement for 1099 reporting. It is widely thought that this would be an undue administrative burden for small businesses. As of the issuance of this e-Focus, the legislation requiring the additional reporting remains unchanged. Businesses are encouraged to prepare for the additional reporting in 2012.

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

All Entrepreneurial News                             Entrepreneurial Services

 

For further information, contact: