August 2010

The Coming 1099 Revolution: Are You and Your Clients Ready?

From Journal of Accountancy.

Health care reform act provision vastly expands information reporting requirements.

Revenue-raising provisions in the Patient Protection and Affordable Care Act, PL 111-148, and the Health Care and Education Reconciliation Act of 2010, PL 111-152, like their health care provisions, have far-reaching implications. One could even fundamentally change the way we do business and keep records in the United States—by dramatically increasing information reporting requirements for business transactions.

Under IRC §§ 6041(a) and (h) as amended by the Patient Protection Act, beginning Jan. 1, 2012, virtually all payments by a trade or business aggregating $600 or more to any single vendor during any calendar year will have to be reported at the end of each calendar year to the vendor and to the IRS on Form 1099. Vendors include almost anyone a trade or business pays in the course of doing business, other than its employees whose compensation is already reported on Forms W-2.

Implementing this change will require collaboration among businesses and software vendors and likely the help of CPAs to correctly identify, characterize and report these transactions. Purchases affected could range from inventory to payments for advertising services to the electricity bill. IRS Commissioner Doug Shulman, however, said in a speech in May that the Service plans to administratively exempt business transactions conducted using payment cards such as credit and debit cards, because those transactions would already be reported by the payment processors.

Learn more.

Listen to our webinar: "Additional Reporting Requirements from the Health Care Bill: Are You Prepared?"