An Overlooked Provision of the Health Care Reform Law Radically Changes and Increases Businesses 1099 Filing Requirements

by

Via CNN Money

Most business are familiar with the annual requirement to file Form 1099 to report payments to individuals of over $600 for contract services.  A little publicized provision of the new health care bill, Section 9006, mandates that beginning in 2012 all companies will have to issue 10999 tax forms not just to contract workers but to any individual OR CORPORATION from which they buy more than $600 in GOODS or services in a tax year. 

This seems to be a radical change from the philosophy of the purpose of Form 1099, which was similar to the reporting of Form W2 for employees, but for freelancers and independent contractors.  An excerpt from the referenced CNNMoney.com story illustrates the point well:

“Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.”

This will dramatically increase the number of 1099’s issued each year, and will prove to be an administrative burden to businesses.  Also, because the new 1099 filing requirements are so broad most likely the majority of all payments to vendors by businesses will now need to be reported.  When you combine this information with the sales and use tax return and payroll tax return requirements, the IRS will now have enough information to recreate a significant portion of the accounting records of all businesses in America.

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