One of those industry watcher’s advice comes from a Lavante’s partners, Convey Compliance Systems, a firm that provides tax reporting software and services. Their spokesperson, Troy Thibodeau, noted that the entire 1099 reporting process had largely been overlooked by many organizations, leading to low adoption of the automation that would deliver added efficiencies and cost reductions. This attention deficit all changed when the healthcare reform act shined a very bright light on the operational and process problems that organizations face in the 1099 reporting area.

My colleague at Lavante, Sherry DePew added her expertise to the article, noting: “The majority of the people we talk to say this has given them time to get prepared. Everyone pretty much knows this is coming.”

The article expressed complete agreement that the expansion of 1099 reporting is inevitable. To best prepare to meet future requirements, companies should look to automate the process and to implement repeatable processes, both as a way to effectively manage the entire 1099 reporting process now and in the future.

For more information, click here read the entire article by Diane Sears. And, let us know what your thoughts are about this issue and how you are planning to prepare for possible changes.

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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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.

Participants had varying degrees of uncertainty about how the legislation would affect their companies in the coming months. Even with knowledge of the ongoing repeal actions, there was an overall consensus that the issue of 1099 reporting changes has been evolving for over 15 years, and that some form of change is inevitable. An AP manager from a F1000 company expressed that if the original law were enacted, their company would experience an increase from 2,500 1099 applicable vendors to over 20,000 applicable vendors. She stated her approach as, “I am going to move forward assuming that the law will pass in some form. I can’t afford not to be prepared!” This was the collective opinion of the room.

We will continue to monitor the changes to the 1099 laws, so check back to The Hub or subscribe to receive automatic updates.

Lavante hosts an ongoing series of regional finance professionals discussion session. Please contact us directly if you would like to find out more.

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.

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

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.

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

This change was part of the Housing Assistance Tax Act of July, 2008. It was better known for providing credits to first-time home buyers, but it also created the new 1099-K tax form, which shifts the 1099 reporting for companies that use credit cards to pay suppliers. Under this new ruling, starting in 2011, all financial institutions that process credit or debit card payments will be responsible for sending the 1099 documentation of that year’s transactions to both their clients and the IRS. Before this ruling, the company that received the funds was required to handle the reporting.

The ruling will only impact merchants that have over 200 payments that total over $20,000, but it will have enormous impact on companies of all sizes.

First, AP departments that use automated systems to populate spend files and create 1099 reports will need to remove those transactions that now fall under the responsibility of the third-party funding agent.

Second, it will increase the 1099 reporting responsibilities of all institutions that act as a funding agent for another company. This would include both financial services companies (banks, credit card companies, etc.) as well as outsourced AP companies. As of January 31, 2011, these third party companies will be responsible for collecting W9s and producing the 1099 reports next year.

The reasons behind these changes actually make a lot of sense. It is intended to shift the task of producing 1099 reports to the institutions that actually own the relationship with the entity that makes the payment. In the case of a credit card, the financial services company holds the cardholder information, not the merchant, which is necessary to obtain accurate reporting information.

For a deeper discussion about how to prepare for the impact of 1099 reporting laws, visit the Lavante 1099 resource center.

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.

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

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.

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.