1099 Reporting Posts

President Obama on Thursday signed into law a bill repealing the expanded 1099 reporting requirements from the 2010 health care law.  The Senate passed the repeal bill in an 87-12 vote on April 5 after the House passed the bill in March.

The law repeals the expanded 1099 reporting requirements that were included in the funding provision of the 2010 health care law, which required all for-profit corporations issue 1099 forms to vendors from whom they purchased over $600 of goods or services in a tax year and was scheduled to go into effect for all payments made after December 31, 2011.

The repeal comes after months of debate about the impact of the reporting requirement on small businesses and how to cover the cost for the 1099 repeal, which is estimated at nearly $22B over the next 10 years.

“Today, I was pleased to take another step to relieve unnecessary burdens on small businesses by signing H.R. 4 into law,” reads the president’s signing statement. “Small business owners are the engine of our economy and because Democrats and Republicans worked together, we can ensure they spend their time and resources creating jobs and growing their business, not filling out more paperwork. I look forward to continuing to work with Congress to improve the tax credit policy in this legislation and I am eager to work with anyone with ideas about how we can make health care better or more affordable.”

So what does this mean for companies and their 1099 reporting?  Was expanded 1099 reporting a passing fad?  Actually, discussions around expansion of 1099 reporting requirements date back to the Bush administration and are aimed at better tracking business expenditures, earnings, and tax liability.  In order to ensure your company is ready to meet current 1099 reporting requirements, as well as future changes, the safest bet is to make sure you have the policies, processes, and systems to ensure up-to-date supplier tax information.

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Today, the U.S. Senate passed the House’s 1099 repeal bill, H.R. 4, in an 87-12 vote.  The bill will go directly to the White House where President Barack Obama will have the opportunity to sign or veto the bill.

The 1099 reporting requirements is part of funding provision of the 2010 health care law. It required all for-profit corporations to issue 1099 forms to vendors from which they purchased over $600 of goods or services in a tax year, and is scheduled to go into effect for all payments made after December 31, 2011.

The Senate vote comes after months of debate about the impact of the reporting requirement on small businesses and how to cover the cost for the 1099 repeal, which is estimated at nearly $22B over the next 10 years.

Sign up for the Lavante blog today to stay on top of the 1099 repeal or check out our 1099 reporting center.

Today, the House passed the H.R. 4 bill in a 314-112 vote, repealing the 1099 reporting requirements from the funding provision of the 2010 health care law. The bill eliminates the requirement that all for-profit corporations issue 1099 forms to vendors from whom they purchased over $600 of goods or services in a tax year, scheduled to go into effect for all payments made after December 31, 2011.

The cost for the 1099 repeal is currently estimated at nearly $22B over the next 10 years. The funding remains the biggest debate around the 1099 repeal across the House, the Senate and the White House.

There was significant controversy in the House around the funding of the H.R. 4 bill, with Democrats calling it a tax hike on middle-class Americans. The bill increases the amount of health insurance subsidies that could be recaptured in cases where a family’s income exceeds certain thresholds. Read more.

The Senate passed their own 1099 repeal back in February as an amendment attached to the FAA funding bill. The funding for the Senate repeal gives the Office of Management and Budget the ability to take away nearly $44 billion of discretionary budget authority—except from the Departments of Defense, Veterans Affairs and Social Security.

The House bill will end up in the Senate next. The issue that still remains is – how to make up the funding for the health care law.

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President Obama released his proposed fiscal year 2012 budget this week. The budget contains a portion of the 1099 provisions from the 2010 Patient Protection Affordable Care Act (aka, the health care law).

As a refresher, the funding provision of the health care law requires all for-profit corporations to issue 1099 forms to vendors from whom they purchased over $600 of goods or services in a tax year. These changes are scheduled to go into effect for all payments made after December 31, 2011. The biggest changes from current 1099 reporting requirements are:

1. 1099 reporting for payments to corporations (except tax-exempt corporations), most payments to corporations are currently exempt
2. 1099 reporting for purchase of property (goods, merchandise, supplies, raw materials, equipment, etc.), currently only payments for services require a 1099

Now, back to the budget. The 2012 budget includes the requirement for 1099 reporting for payments to corporations beginning in 2012, but would repeal the requirement relating to payments for property. The proposal is expected to raise about $10 billion over 10 years (vs the nearly $20 billion expected from the 1099 provisions in the health care law).

Meanwhile, the House is moving forward with its bill to repeal the 1099 requirements. The bill was passed by the Ways and Means Committee on February 17 and is expected to go to the House floor this spring. This follows the 1099 repeal amendment attached to the FAA funding bill which passed in the senate earlier this month. If the 1099 repeal bill passes in the House, it will end up in a conference committee to reconcile the differences with the Senate version. The issue that still remains is – how to make up the funding for the health care law.

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On February 2nd, the Senate voted on multiple topics related to the 1099 reporting requirements as part of the FAA reauthorization bill. The first was a repeal of the 2010 Patient Protection Affordable Care Act (aka, the health care law). The health care repeal failed in a 51 to 47 vote. The second was a repeal of the 1099 reporting requirements that are part of the funding provisions of the health care law. The 1099 repeal passed in an 81 to 17 vote.

So what happens now? Are the new 1099 reporting requirements dead? Well…they’re not dead yet.

On January 25th, I discussed the efforts in the House to repeal the 1099 reporting. The House will need to vote on a bill to repeal the 1099 reporting requirements. If passed, the bill will go back to the Senate. The Senate may or may not tweak the bill and then will vote on the repeal. Then it’s up to President Obama.

What still remains uncertain is how the estimated $17 billion to $19 billion in revenue from the 1099 reporting provision will be offset.

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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.

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