Speaking of 1099's

[jamesray50]

You may or may not know about this, but beginning in 2012 all business will have to report payments made to everyone (corporations, independent contractors and businesses) in excess of $600. These will be due on the 1099 by January 31, 2013. This means that you will have to get an EiN from everyone you make a payment to in 2012. The exception will be payments you make with a credit card.

There is a possibility this may be repealed or the threashold increased. We can only hope. Otherwise it is going to be a nightmare to comply with.

[KristineS]

We've been talking about this for months. I hope it does get repealed or it will be a nightmare. I can't even imagine.

[vangogh]

I thought that was already true. Technically I think all of my clients (those spending over $600) should be filling out 1099s and sending them to me. Only one or two ever have. In fact one reason I have an EIN is so I don't have to give out my social security number when requested for 1099s.

I wonder if this is really new or more enforcing something that already exists, but is rarely followed.

[Evan]

This is something NEW because it extended the provisions beyond what currently exists. Corporations are now exempt, but they wouldn't be under the new regulations. This means that if you go to Staples and order more than $600 worth of stuff, you should be issuing them a 1099.

While the law was "well intended" perhaps, I don't think it was well thought out. Anticipate that portion to be repealed, I'm sure it will be pushed for during this upcoming Congress.

[jamesray50]

Right now a business only has to issue a 1099 to an independent contractor or attorney who they paid more than $600 to. The new laws doesn't go into effect until 2012. I think there are a couple of exceptions that will go into effect in 2011, but without looking it up I can't remember what they are. The new law really is new because it will effect all businesses. You will also have to issue a 1099 to everyone you pay more than $600 to, whether it is materials, labor, or just regular business expenses, be it a corporation or non corporation. The IRS wants to make sure everyone is reporting income.

[jamesray50]

Since when does congress ever think things through? I'm just wondering if we will have to issue the IRS a 1099?

But, congress isn't the only ones who doesn't think things through. The CPA firm I worked for used a high end accounting program with a payroll module that didn't function properly. And the support was no help at all. I don't think the programmers who wrote the program for the payroll had any input into how payroll should be processed, which caused problems with running payroll.

[vangogh]

Ahh, that does sound new. It also sounds somewhat stupid. Seriously who's going to send Staples or Office Max a 1099. As if the average person would even know where to send it. And I'm sure the accountants at those companies will be happy to have all those 1099s to deal with. Unless of course we all pay with credit cards since when we buy things on credit we put them to different uses than when we pay by cash or check.

Do you know what the intention of the new law was. I'm guessing it's to help the IRS by giving them a bigger paper trail, but it seems like for the rest of us it just means more paperwork.

[Patrysha]

Oy! What a headache...so I say once again...damn I'm glad to be Canadian. Now just to pray our gov't doesn't play copycat on this one.

[jamesray50]

They snuck it in the health care reform act. I suppose they think it will scare businesses into reporting all of their income for the year since they receive copies of the 1099's and a 1096 that are sent out to every one. Then they can reconcile the 1099s the businesses receive to the income they report for the year. So all this additional income they receive from us business tax payers will pay for all the stupid things included in the health care reform act.

But they are problems with this. In addition to trying to implement this, they are not going to be able to reconcile the 1099s to the income tax returns. Individuals don't send 1099s to businesses, so income is always higher than 1099s received. Now, they are going to get tons of paper in the mail, but of course I'm sure there will be an e-file requirement for over so many filed.

But, I plan on keeping my eyes and ears open on this subject. I see a money making opportunity for me.

[Evan]

I don't think they realized how "big" of an impact that change made. It sounds like a simple change in reality, but has a lot of consequences. Not too sure what the rationale was, but I'm sure it was just created as an additional step to make sure that all of your vendors are reporting the income you're paying them.