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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