The House is back in session for the year and there is a flurry of activity about the 2010 Patient Protection Affordable Care Act (aka, the health care law) and the associated 1099 tax provision and reporting changes.
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 It is unlikely that the provision will repealed vs. amended.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.