I’d like to use this format to repeat a few of the Lavante SIM features called out by Sears in her article.

1. It drives compliance from suppliers. It automates the process of gathering information that would cost your company money, time, and resources if it were missing. Perhaps most importantly this year, with the 1099 tussle, Lavante SIM performs an automating taxpayer identification number (TIN) match to ensure quality data. In addition, it automates the process of collecting data and documents by pinging suppliers when their expiration dates are approaching. Lavante SIM also offers an out-of-the-box solution for new supplier set-up and data collection, taking note of details such as the supplier’s status as woman- or minority-owned.

2. It’s affordable.Lavante SIM is a software-as-a-service (SaaS), so organizations don’t have to invest their IT time in setting it up in-house. Also, organizations can start with one or two components and add others as they go. Known for its high-yielding audits in the profit recovery space, Lavante offers a unique solution for keeping the cost of its vendor portal product low. Lavante’s recovery services can pay for the project.

3. It‘s scalable. Charges are based on the application’s ability to get suppliers to comply with data requests. It’s a subscription model based on the number of suppliers per month per tier.

Check back for more links to media coverage of Lavante SIM.

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A payer that fails to carry out backup withholding when it’s required may itself be liable for any amount that should have been withheld, according to information from the accounting firm, Deloitte.

What’s received less attention is the fact that the current backup withholding rate of 28 percent is scheduled to expire at the end of this year. According to information from the IRS, it will revert to 31 percent. That’s because the request to extend EGTRRA, or the Economic Growth and Tax Relief Reconciliation Act of 2001, does not include keeping the backup withholding rate at 28 percent. So, the rate will revert to 31 percent, or the level that was in effect before EGTRRA.

Although the change is still six months out, AP professionals will want to begin identifying the changes to their systems and procedures that they’ll need to make in order to shift to the new rate.

Section 6041 of the Internal Revenue Code outlines 1099 reporting requirements.  The Patient Protection and Affordable Care Act includes an Amendment to Section 6041 which now requires 1099 reporting for any payments aggregating $600 to a supplier per year

The new amendment will now create requirements for reporting for:

• All for-profit corporations (excluding tax-exempt corporations)
• Payments made for Property (goods, merchandise, supplies, raw materials, equipment, etc.)

Companies will be required to submit accurate TIN information or face monetary penalties

The provision in the health care law is aimed to reduce the gap between income that individuals and businesses make and the federal taxes they pay, which the Government Accountability Office estimates is $345 billion

The Wall Street Journal says Congress hopes the new 1099 provision will collect $17 billion more in federal taxes and fees.

What has been changed?

• Before: Most payments to corporations were exempt from Form 1099 reporting requirements. These exemptions include: Providers of Goods, Corporations, Tax Exempt Organizations, Internal Organizations, and Retirement Plans. 1099’s are only required for a small subset of the suppliers where payments were made. This was typically well less than 10% of supplier payments.
• After: Companies will be required to submit 1099’s on all for-profit companies who receive payments greater than $600. This will typically be 95+% of supplier payments.
• The big change: Corporations have been added to the entities that require 1099 reporting this will account for the biggest increase.

What are some details surrounding the timing of the new change?

• New law becomes effective for all payments made after December 31, 2011.
• Companies should plan to start collecting and validating W-9’s & TIN’s for each supplier they will spend more than $600 with for the 2012 year.
• Companies will need to issue and submit 1099’s to suppliers and IRS early in 2013 for the year 2012.

Having closely monitored this impending law for years Lavante can help significantly to help companies automate the collection of W9’s as well as the require IRS TIN-match. At the very least this huge work load can be eliminated. We encourage people to learn more at HERE.

How will this effect AP and other financial personnel at corporations?

The new Legislation poses a significant burden to corporation that must ramp up their reporting efforts.

• Information reporting requirements bring with them the responsibility of obtaining appropriate taxpayer identification numbers (TINs) from suppliers that were not previously subject to Form 1099–MISC reporting.
• If the corporation fails to produce a TIN, or fails to properly perform their 1099 reporting, then backup withholding is required on payments 1099-application suppliers.

The new Legislation also poses a considerable increase to the amount of reporting that takes place within a business’s accounts payable system and department.

• Employers will need to implement the appropriate record keeping and data collection processes to meet the reporting requirements, including, where necessary, processes to effectively communicate the required information to third parties providing payroll administration or managing other reporting obligations.

The monetary risk is expected to increases significantly.  Where companies were experiencing b notice fines at the following levels:

• $50 per each supplier that is not properly reported
• $250,000 maximum potential risk per company

The new legislature increases the levels to:

• $250 per each supplier that is not properly reported
• $1.5M maximum potential risk per company, although some sources have indicated that this number could be higher

Due to the steep increases that the new amendment poses, it is widely believed that the many aspects of the new legislation will go through an appeals process.

Congress tucked a small section into the enormous bill that amends Section 6041 of the Internal Revenue Code that will soon mandate businesses to file an information return (likely a Form 1099) when payments to the single payee total $600 or more in a calendar year… including corporations!

The provision is effective for payments made after Dec. 31, 2011. Currently in Section 6041 most payments to corporations are exempt from Form 1099 reporting requirements. These exemptions include: Providers of Goods, Corporations, Tax Exempt Organizations, Internal Organizations, and Retirement Plans. Possibly the biggest change is that reporting is now required for corporations. As of now 1099’s are only required for a small subset of the suppliers where payments were made. This is typically well less than 10% of supplier payments, under the new law that number could spike to 95%.

Section 9006 of the 2010 Health Care Act also includes “gross proceeds” paid for “property” or services. (if the $600 min is met) This will of course exclude tax-exempt corporations under Section 501(a) of the IRC. Vice President of Government Relations has stated that if a vendor refuses to provide a Tax Information Number to the payer required to provide the 1099, the vendor may be required to withhold on behalf of the IRS. I have been unable to find a corroborating source for this online, but assuming this comes to pass, this will create a mountain of work to stay in compliance with such legislation. Legislation requiring this level of attention and workload from corporations is by no means unprecedented.

Although there is much to learn about the new legislation the new reporting appears as though it will include payments for much routine expenditure

• Some travel expenses such as gasoline and automobiles
• Computers and hardware purchases
• Software
• Rental and Leases
• Office supplies and expenses
• Janitorial services
• Some mail delivery services

If all of these items require 1099 reporting we will be dealing with the exchange of potentially billions of forms for which companies will have to obtain and verify an official vendor/supplier company name and a TIN and match the information successfully or they are penalized!!!

Having closely monitored this impending law for years Lavante can help significantly to help companies automate the collection of W9’s as well as the require IRS TIN-match. At the very least this huge work load can be eliminated. We encourage people to learn more at HERE. So how much tax revenue do you suppose that this provision will save compared to what is will cost the business that is now forced to deal with the new demands?!

In this bloggers opinion benefit to taxpayers are completely undermined by the volume of work and the spike in costs that the new mandates will create. Business of all sizes will be trying to support increased workload for employees, opportunity costs associated with pulling staff off of their already swelling workloads, payments to accountants and possibly lawyers and much more.

Specifically, businesses now will have to file Form 1099s for all payments they make, including those to corporations, that total $600 or more to a single payee in a calendar year, the Journal of Accountancy reports. So, the previous 1099 reporting exemption for corporations will end, other than for tax-exempt organizations. This provision becomes effective for payments made after December 31, 2011. The first 1099s under the new regulations will go out in 2013.

- When selecting vendors though a competitive bid process, let candidates know that the contract award is contingent on your firm receiving taxpayer identification numbers from them.

- Ask vendors to include TINs on all invoices.

- Use the IRS’ “TIN Matching Program.” This web-based service allows  authorized payers, or those entities that have filed information returns with the IRS in one of the two most recent tax years, to match 1099 payee information against the IRS’ records. What’s more, this can take place before an organization files its returns. The service matches the payee with the W-9 name and TIN with the IRS’ records. The payoff? Users of the system see a drop in backup withholding and penalty notices, as well as a reduction in the number of errors found during TIN validation, the IRS says.

A TIN is one of the following four numbers.

1. A Social Security Number (SSN)
2. An Employer Identification Number (EIN)
3. An IRS individual taxpayer identification number (ITIN). Aliens who do not have an SSN, and are not eligible to get one should get an ITIN. Form W-7, Application for IRS Individual Taxpayer Identification Number, is used to apply for an ITIN.
4. An Adoption Taxpayer Identification Number (ATIN). An ATIN is a temporary tax identification number issued for a child born in the U.S. An ATIN is used as an identifying number is the child is not eligible for an SSN.