1099’s are a pain to manage and what I see as one of the most neglected accounting requirement. I hate getting that notice from the IRS telling me I have discrepancies with my 1099’s because it is an additional task that has to be squeezed in with the rest of the "to do" list. IF the law does change, it will be even more time consuming to get compliant, so why not schedule some time throughout this year and get your vendor/1099 data updated? Below is a clip from one of the Microsoft Dynamics GP blogs I thought I would share.
Starting January 1, 2012, tax reporting changes included in the Patient Protection and Affordable Care Act (PPACA) require your business to issue a 1099 to every vendor (individuals or corporations) of services or property to whom you have paid more than $600 for the year. In addition to issuing the forms, the 1099 reporting mandate requires your business to also get Taxpayer Identification Numbers (TINs) from all of your vendors. You’ll even have to withhold payments to businesses that fail to provide their TIN.
Currently, your business only needs to report 1099’s for those payments to individuals that total over $600. After 2011, you will probably issue a 1099 to most of your vendors.
There are a few exceptions, including payments made to a vendor through your credit card, that don’t have to be reported. Credit card merchants will report charged transactions directly to the IRS. Consider how that might work for or against you. If you go to Joe’s Office Supplies down the street to purchase $800 worth of paper by check, make sure you get a W-9. This transaction is reportable. However, if you go to Joe’s Office Supplies and purchase $800 worth of paper using your American Express card, you will not need to report anything.
Serious opposition exists to section 9006 of the PPACA, and substantial lobbying may lead to a repeal of the 1099 reporting mandate. Although designed to prevent tax evasion by corporations, implementing 9006 will be costly for all businesses. One major argument is that 9006 imposes new and complex record-keeping data collection and reporting requirements on businesses thus diverting revenue-generating energy. A second major argument is that businesses may consolidate their purchases with several large vendors to reduce the paperwork thus choking smaller vendors out of the market place.
How the issues with 9006 will be resolved is uncertain, so keep your eye out for news releases throughout the year.