Posted by admin
on Jun 30, 2010 in Businesses
| 0 comments
On March 23rd, President Obama signed into law health care changes that will impact how you issue 1099s for your business. There are only a few lines buried in the new law in Section 9006 that will impact businesses in the U.S. drastically. Planning for that change now can turn a year-end tax nightmare into a January dream come true.
Those few lines mandate that beginning in 2012, all businesses must issue 1099s to everyone they pay more than $600 to during the year. This changes the 1099 reporting requirement in two ways. You will need to report payments for services as well as well as tangible goods (materials). Currently you are only required to report payments for services and legal fees. You will also be required to report payments to corporations as well as individuals. These two small changes could impact the number of 1099s you are required to file exponentially.
But still, what does the Health Care reform bill have to do with 1099s? To help offset the cost of the health care bill, the 1099 provision would help uncover fraudulent deductions and unreported income. The IRS estimates that more than $300 billion in tax revenue goes unreported each year. By enforcing tax compliance, they are able to reduce the cost of the health care bill while offering millions in tax credits.
So the question is, “what can I do now to make this change transparent for my company?” The answer – 1) Start collecting W-9 forms for anyone you pay regardless if it is for services or goods, regardless of whether they are incorporated or not; regardless of the amount, and 2) make sure these tax ID numbers are entered into your accounting program. When it is time to print out 1099s in January of 2012, you and/or your accountant will no longer need to go through each payee to determine if it they are a service provider, if the company is incorporated or not, then track down the taxpayer ID number. Now there’s only one criteria – is it over $600?
Give us a call for more information on this and many other tax changes resulting from the new health reform legislation.