In response to the legislation Congressional Democrats and Republicans have both submitted repeals and or amendments in an effort to undo some of what many see as overly burdensome elements of the new 1099 reporting requirements.  The first wave of these efforts -amendments to raise the $600 limit and to repeal the law altogether –  were both denied by the Senate on September 14th.   This Monday, similar amendments were introduced by Senate Democrats and Republicans to the Small Business Jobs Act but… neither amendment received the necessary 60 votes to be included in the final bill.

Although, many accounting professionals, politicians and small business owners are searching for ways to either manage or overturn the new requirements, it is important to acknowledge that “repeal” is not a fait accompli.  In fact the opposite may be more likely in this case; consider that the 1099 reporting changes are not new ideas from the 2010 Obama administration.  The idea dates back to GAO studies conducted over several years.  The recommendations to alter the 1099 reporting is clearly articulated in a 2005 report (and others like it) where the GAO reports that 92% of small businesses are not filing 1099’s which translates into significant losses to the federal government.  Given this long history and planning, the new 1099 reporting changes appear to have considerable stability and support.

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*  As a bit of background, the new amendment will require reporting for all for-profit corporations (excluding tax-exempt corporations) as well as for any payments made for property (goods, merchandise, supplies, raw materials, equipment, etc.)  In addition, the new requirements require reporting for any supplier that has receive $600 or more in aggregate payment for a calendar year. A close look at this requirement reveals that where companies were performing 1099 reporting for less than 10% of their supplier populations they will now be reporting for more than 90% of their suppliers. Recently, a Lavante client estimated that its 1099-applicable suppliers could jump from only 2500 companies to over 50,000 when the new law takes effect. Because this requirement will have a major impact on organizations, it is important to begin developing a plan to effectively manage this process as soon as possible.

Download the “New 1099 Tax Laws” Webinar for free!

We are still celebrating a huge success surrounding last Friday’s webinar.  With very limited outreach efforts, we overbooked the capacity of our web cast provider and we retained all attendees for the entire event.  Anyone well rehearsed in presenting webinars will acknowledge bth of these data points as huge feats!

Sherry DePew conducted and expert walk-thru of the new 1o99 laws which will dictate the future of 1099 reporting for companies (of all sizes) for the next several years.  The new laws will increase workloads, staffing requirements and exposure to significant non-compliance fines.  Sherry outlined a very realistic plan for getting all the facts and for getting prepared.

We are scheduling many more webinar events about similar and related topics soon.  Please notify us at info@lavante.com to get on our distribution list.

We would love to hear any comments or questions whether you were able to attend of not and we are offering a free video replay of the webinar by clicking on the tile below.

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.