Getting Ready for Additional 1099 Reporting
One provision in the recently enacted health care reform law that many business owners may have overlooked imposes additional tax reporting requirements on businesses, including contractors. The provision will require businesses to issue Form 1099s to all vendors, both incorporated and unincorporated, to which they pay $600 or more annually for equipment, materials, supplies, and other goods. Currently, businesses are only required to issue a Form 1099 for payments of non-employee compensation, interest, rents, royalties, etc., made to unincorporated payees.
What To Expect
The new provision will be implemented in 2012. In addition to keeping detailed records regarding payments, companies will face the burden of having to determine and include on the Form 1099 the Taxpayer Identification Number (TIN) of the vendors they deal with.
Supporters of the new requirement have said that it could raise an additional $17 billion to help cover the costs of the new health care law. However, construction industry associations oppose the new requirements and business owners contend that the cost of complying with the new requirement will place additional pressure on their profitability.
The good news is that the provision may be changed before 2012. We will keep you posted on any future developments.
“. . . companies will face the burden of having to determine and include on the Form 1099 the Taxpayer Identification Number (TIN) of the vendors they deal with.”