1099 Reporting Requirements

In the government’s search to provide the greatest number of services to the greatest number of people, some of the admittedly mundane details are often overlooked. This has certainly been the case with the passing of the Patient Protection and Affordable Care and Small Business Jobs Acts created in 2010 designed to assist uninsured individuals with rising health care costs and stimulate business growth. In an effort to make these acts more “revenue neutral” these Acts contained provisions that changed the reporting requirements on Form 1099.

Under the Patient Protection and Affordable Care Act, a 1099-Misc would be required for all business purchases over $600 – even if the goods or services were purchased from a corporation. The Small Business Jobs Act requires landlords to issue a 1099-Misc to service providers.

Historically these forms had been completed only by businesses that paid more than $600 in rents and/or payments for services performed within the year to unincorporated individuals. But due to the government’s suspicion that an abundance of unreported income accounted for billions of unpaid tax dollars that could defray the increased costs for health care, they decided to change their policy. This caused a huge uproar from the business community due to the resulting unreasonable burden of paperwork and reporting.

Under the new laws businesses must report any service or vendor payments totaling more than $600 during any given year, including corporations. This would include reporting purchases from Costco, Staples, or Amazon for supplies!

Rental property owners would report payments made to contractors and service providers such as landscapers and handymen. There has not been a filing requirement for landlords in the past as they were not considered to be ‘in business.’ And, since most landlords would be using their social security numbers as their tax ID number to complete the Form 1099s, they would be forced to provide critical (personal) information to numerous vendors and service providers vastly increasing their exposure to identity theft.

Consequently, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 was passed in April of this year to counteract and correct these onerous requirements. The rules have reverted back to the original rules where businesses must report payments for rents and services but not supplies and not to corporations and requirements for landlords have been waived.