I read on FatWallet that a hidden gem in the new health care reform law will require a business to issue a 1099 Form to all vendors starting in 2012 if the business purchases $600 or more in goods or services in a year from that vendor.
Currently a business is only required to issue 1099s for payments for services, not goods, purchased from individual persons, not corporations, if the total payments to that person exceed $600 a year.
I find this quite unbelievable. Small business owners buying from Costco will have to send a 1099 to Costco at the end of the year. Because chain stores are often owned by different entities under a franchise agreement, a business buying from one store versus another under the same chain will have to track the corporate entities behind each one separately. What a nightmare.
Because it’s so unbelievable, I had to look up the laws myself. It’s amazing but true. Section 9006 of Patient Protection and Affordable Care Act says (the key phrases are in bold):
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) IN GENERAL.—Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:
"(h) APPLICATION TO CORPORATIONS.—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation that is not an organization exempt from tax under section 501(a).
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.— Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended—
(1) by inserting "amounts in consideration for property," after "wages,",
(2) by inserting "gross proceeds," after "emoluments, or other", and
(3) by inserting "gross proceeds," after "setting forth the amount of such".
(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after December 31, 2011.
After all the insertions, the amended Section 6041(a) of the Internal Revenue Code becomes (the inserted words are in bold):
(a) Payments of $600 or more
All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds, fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gross proceeds, gains, profits, and income, and the name and address of the recipient of such payment.
Because I show ads on my blog and I sell my book, I’m considered as "engaged in a trade or business." Right now I don’t issue any 1099s since I don’t pay over $600 in a year for services from any individual person. All expenses are paid to corporate entities. Under the health care reform law, I will have a new 1099 reporting requirement starting in 2012.
- A Thomson Reuters training seminar on this change: Health Care Reform Brings Several Changes to Form 1099-MISC Reporting
- The Boston Globe: Healthcare reform bill expands business tax reporting
- 2009 report from the Government Accountability Office (GAO) urging Congress to expand 1099-MISC reporting requirements: Tax Gap: IRS Could Do More to Promote Compliance by Third Parties with Miscellaneous Income Reporting Requirements