Oh, new 1099 reporting requirements, we hardly knew ye…
Remember those new 1099 reporting requirements that caused such a sensation when they were quietly sneaked slipped burrowed inserted into last year’s health care law? Under the terms of the Patient Protection and Affordable Care Act, businesses would have been required to issue a form 1099 to all vendors who provided goods and services during the year which totaled more than $600. The idea of the provision was to “encourage” reporting (by, you know, requiring it) of transactions thought to be under the radar previously to the tune of $2.5 billion.
Eventually, the story made news when small businesses, in particular, reacted strongly to the amount of paperwork which would be generated under the provision. So, of course, you can imagine Congress’ surprise to find the provision in a bill that they actually wrote, “read” and voted on. And despite the fact that most lawmakers publicly decried the provision, Congress couldn’t manage a repeal.
Fortunately, even Congress couldn’t stand in its own way long enough to keep this on the books. The provision was eventually repealed and on yesterday, President Obama officially signed legislation eliminating the provision.
Also on the President’s desk for elimination? A separate, but similar, tax reporting requirement for landlords. Under the Small Business Jobs and Credit Act, Congress expanded reporting requirements for landlords to include any person who receives rental income from real estate. Prior to the Small Business Jobs Act, only taxpayers who were engaged in rentals as a trade or business were subject to the requirement. The tweak to this requirement was also repealed.
So now, we’re more or less back where we started before Congress got involved. I know *I* feel better. How about you?
As a CPA, I understand how bad the 1099 requirement would cause for businesses (or their accountants). However, such a requirement would cause a new line of business, and new software, which is good for the economy. But then again, it would cause a huge headache. What a relief.
I am the treasurer of a small non-profit that makes payments to contractors. The new reporting requirements were a real pain in the rear, I’ll admit. It wasn’t the paperwork that was problematic, it was trying to figure out which contractor was required to get one – and which wasn’t. So, with my “treasurer” hat on, I’m glad it’s repealed. However, as a taxpayer – and as a tax professional – it stings to know that many of the contractors I was paying on behalf of my organization are probably under (or not) reporting that income to the IRS. I hate seeing small business people get away with hiding income.
What the heck! Although, now that we are back at square one, is there any chance you can review the landlord and 1099 requirements that were in effect prior to the change? Your info is great. Thank you,
We recently wrote a blog post concerning the tax repeal. Look at what we have to say about the tax repeal and small business.
However part of the legislation is still in effect. All credit card processors are required to report all gross receipts of businesses that transact over 20,000 in annual credit card sales.
Think of how many millions of businesses that do more than 20,000 in credtit card sales.
The IRS is suppose to be hiring 15,000 new workers as the IRS will be going after american small businesses that under report their taxes. which equates to many businesses going out or business and more lost jobs.
Its my belief that MOST small business under report as they cannot survive paying the 20% self employment tax.