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1099MISC Reporting Requirement

December 27, 2010 By

I remember when ObamaCare passed that they also passed an amendment to the IRS regulations requiring you to issue 1099s to anyone to whom you made a payment of more than $600, including suppliers. Do you know if we need to do that for this year or will it start later? (Or hopefully, be repealed)

Thanks for your help,
Melanie

Melanie,

Well, Congress tried twice to overturn this 1099MISC requirement that was a part of the Patient Protection and Affordability Act (ObamaCare), but neither attempt succeeded.

I learned the details about one of the bills to overturn the reporting requirement and it was more complicated than the original! It had different dollar thresholds based on the type of transaction and an exemption if a credit card was used (bu no mention of a debit card!). I was imagining some of my small business clients dealing with all of that in their QuickBooks programs! Ugh!!!

As of today (Dec 27, 2010), all businesses will be required to send 1099MISC forms to all suppliers including corporations for payments made beginning Jan 1, 2013.

That means that in 2012, you will need to collect W-9 forms (that request legal names and SSNs or EINs) from every business that you purchase more than $600 in goods or services. This means even corporations like a hotel chain or Office Depot!

You have all of 2011  to get your record keeping in place. Make sure that your accounting system is keeping track of payments issued to specific vendors, contractors, and other businesses. Track the name, address, and taxpayer identification number of the vendor. Make sure that your accounting system can separate payments made by credit or debit card from payments made by cash or check. QuickBooks can do all that if you or your bookkeeper enter in all the information as each bill is paid.

From http://www.accountingweb.com/blogs/scotth/exuberant-accountant/get-ready-onerous-new-1099-reporting-rules

Fortunately, the new Form 1099 reporting rules don’t cover payments made before 2012. So there’s still plenty of time to plan for what is likely to be a daunting task…use it wisely!

By the way, I wrote to each of my US senators about this onerous reporting requirement and explained that it was an unnecessary burden on small businesses. Both of my senators now say they oppose the reporting requirement and will work to overturn  (or amend) it.

Carol Topp, CPA

Filed Under: Taxes

Congress passes tax bill

December 17, 2010 By

Wall Street Journal– Congress passed the most far-reaching tax bill in a decade late Thursday, averting across-the-board tax increases, enacting new breaks for individuals and businesses and laying a marker for how Washington might work in an era of divided government.

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Zuma PressSpeaker of the House Nancy Pelosi leaves the House Democratic Caucus meeting Thursday morning at the Capitol.

The measure includes retention of the Bush-era tax rates and breaks for all earners for two years, as well as protection through 2011 from the Alternative Minimum Tax for more than 20 million mostly middle-class households. It includes a new payroll-tax credit for virtually all workers, as well as a 13-month extension of benefits for the long-term unemployed. The wealthy won a lowered estate tax rate for the next two years of 35% on estates of more than $5 million.

Middle-income Americans fared best from the deal, due in large part to the new payroll-tax holiday, according to the nonpartisan Tax Policy Center. Those with the largest average gain in after-tax income, compared with current tax policies, earn between $35,000 and $64,000. They gain about $613, or 0.9% of their income.

Source: Wall Street Journal, December 12, 2010

When President Obama signs the bill, it will keep in place the so-called Bush tax cuts for another two years (2010 and 2011), offer a 2% reduction in FICA taxes (Social Security) for one year and offers another AMT patch.

The 2% reduction in FICA tax applies to self-employed workers also!

This bill means good news for most of my tax clients. It also means I better get signed up for a Continuing  Professional Education (CPE) class in January so I know the details of the bill. I’ve already taken two tax classes in October and November understanding the bills passed in 2010. Ohio CPAs who sign tax returns are required to take 24 hours of classes in taxes every year.

The IRS will be frantic trying to get forms and their programs ready. Be prepared for some delays this tax season.

Carol Topp, CPA

Filed Under: Taxes Tagged With: