October 6. 2010 | Bob Hambrecht
1099’s and more 1099’s…
If accountants weren’t already busy enough in the first quarter of each calendar year, they will soon have even more paper to push. In an effort to make up for lost revenue and help fund recent health care changes under the Patient Protection and Affordable Care Act, small businesses, including non-profits, may have to file even more Form 1099 information reports with the Internal Revenue Service (IRS) beginning in 2012. Whenever a firm buys more than $600 a year in goods or services from a vendor, either an individual or a corporation, a Form 1099 will be required. Currently, a Form 1099 is only needed for every contractor paid at least $600 for services during a calendar year.
Small businesses will now have to begin tracking how much in goods and services were purchased from all its vendors. This will not be an issue for large purchases, but rather for smaller ones. For example, if you were to buy on average $50 a month from an office supply vendor, you will now need to monitor those small purchases to determine if the aggregate meets the $600 reporting threshold at year-end. The result will be more time spent tracking these payments. Additionally, if a vendor does not supply you with a tax ID number, you will be responsible for withholding 28% of the payment and sending it directly to the IRS.
Both Congress and the IRS see this as a way to help make up for the billions in taxes evaded each year. They understand this might be a cumbersome task for many. One loophole noted so far is that under the proposed regulation, “business purchases made with debit or credit cards would be exempt from the new reporting requirement because they are already reported by banks and other payment processors.” On September 14, 2010, the U.S. Senate rejected two proposals that would have repealed or modified the reporting requirements. Stay tuned to WatkinsWire for more developments.
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