Posts from January, 2011

As soon as the speech ended, there was a flurry of interpretations about its potential implications on health care reform and the 1099 reporting requirements that are part of the funding provisions. Just a day before the State of the Union, the Senate picked up the repeal effort on the 1099 tax provision. Let’s take a look at what is really being said.

President Obama’s words from the State of the Union on January 25, 2011 were: “Let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”

The current discussions about 1099 reporting changes are focused on the impact to small businesses and lean toward “repair”, not “repeal” of the 1099 reporting requirements. I blogged on Tuesday about the repeal initiatives in the House.

Within the past few days, multiple new bills have been submitted to the Senate to repeal the 1099 reporting requirements. According to Senate Finance Committee Chairman Max Baucus (D-Mont.), who submitted a bill to repeal the expanded 1099 reporting requirements in the health care reform act along with Senate Majority Leader Harry Reid (D-Iowa), “We have heard small businesses loud and clear and are responding to their concerns. Small businesses need to focus on creating good-paying jobs – not filing paperwork. Many of my colleagues on both sides of the aisle want to work with the small business community to eliminate these requirements, and it is my hope we can come together to pass legislation quickly.”

Another bill was submitted to the Senate by Senators Mike Johanns (R-Neb.) and Joe Manchin (D-W.Va.). Manchin stated “We’re going to work hard to repair this part that basically is so onerous on the small jobs that people depend on that come from the businesses that would have to be reporting,” again, with the emphasis on the term “repair” over “repeal.”

The expansion of the 1099 reporting requirements was originally proposed during the Bush administration aimed at better tracking business expenditures, earnings, and tax liability.
It is unlikely that the provision will repealed vs. amended, with proposed amendments to date looking at increasing the reporting threshold or eliminating the reporting requirements for small businesses.

Given the President’s statements on Wednesday and the bills before the Senate, it is likely that we will see amendments to the 1099 reporting requirements that ease the burden on small businesses. However, any potential amendments will likely not significantly decrease the impact of the 1099 reporting requirements on large enterprises. Read more about the impact.

Sign up for the Lavante blog today to stay on top of the 1099 reporting changes or check out our 1099 reporting resources page.

The House is back in session for the year and there is a flurry of activity about the 2010 Patient Protection Affordable Care Act (aka, the health care law) and the associated 1099 tax provision and reporting changes.

On Wednesday, January 19, the Republican-led House voted to repeal the health care law.  The vote was 245-189 in favor of repeal.  However, even with last Wednesday’s vote, the overwhelming belief is that the health care law will remain in place for now.  The Democratic-controlled Senate doesn’t plan to take up the repeal measure, and even it did clear the Senate, President Obama has promised to veto it.

At the same time, the House is pushing for a vote on repealing the 1099 tax provision of the health-care law which requires businesses to report to the IRS all purchases of $600 or more.  A repeal measure, H.R. 4, has been introduced to the House, but a vote has not yet been scheduled.

So the question is…what does this mean for businesses?  Should we be preparing for 1099 reporting for all purchases for $600 or more?  Do we need Tax Identification Numbers on all of our suppliers by the end of the year?  Should we start the process now, or wait and see how the repeals shake out?

Here’s what we know today.  It is estimated that the new 1099 tax provision will collect $17 billion more in federal taxes and fees.  It is unlikely that the provision will repealed vs. amended.  The largest concern with the 1099 tax provision is the impact on small businesses.  The proposed amendments that went before the Senate in the Fall of 2010 included changes that would ease the impact to small businesses (one bill would have increased the reporting threshold to $5,000 and the other would have eliminated the reporting requirements for companies with less than 25 employees). Although neither of these amendments passed, it is likely that we will see amendments of this nature in the future.

We also know that raising the reporting threshold would not significantly decrease the impact on larger enterprises.  Most large enterprises perform 1099 reporting for less than 10% of their suppliers today and will be required to report on closer to 90% of their suppliers in 2013 (for payments made in 2012).

To ensure that your company is prepared to deal with the final outcome of the legislation, organizations of all sizes should plan now for how to manage the TIN and W-9 collection process with their suppliers.  The good news is that there are solutions in the market to help.  Check out Lavante’s TIN Management solution today.