The health care reform bill included a provision for extra information reporting that could mean many businesses will need to file hundreds more 1099 types of forms to help the government close the tax gap.
Among those forms will be the 1099-K, which will require reporting of credit and debit card payments by payment processors, financial firms, as well as many retailers. The new form will be required when a merchant has at least 200 payment transactions annually, adding up to over $20,000, according to CNNMoney.com. That requirement starts next year.
Starting in 2012, payments to corporations will also be subject to the expanded 1099 rules. Businesses will have to file 1099-MISC forms not only for freelancers and independent contractors, but also for all business payments or purchases of over $600 in a calendar year.
Companies will need to regularly ask for the taxpayer ID number of the various individuals and companies with which they do even a modicum of business, including companies that provide them with computer and phone services. Thats going to mean a whole lot more 1099 forms to hand out to not exactly eager business partners.
The expanded information reporting requirements could help the IRS realize an extra $345 billion in revenue and perhaps shrink the federal budget deficit to some extent. One thing there wont be is a deficit of 1099 forms.
The information reporting requirements have been on the IRS wish list for a long time, and they were included in the health care reform bill as a way to raise revenue and help offset the cost of the program. Apparently, there's a list of these revenue raisers available to members of Congress to include as offsets whenever they need to follow the PayGo rules. Hence the new provisions raising taxes on carried interest and closing loopholes on foreign tax credits for multinational companies in the new tax extenders and unemployment benefits legislation.
All in all, the new 1099 requirements are going to keep accountants extra busy not only during tax season, but all year round.
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