President Obama signed the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act on April 14, 2011, a new law repealing the burdensome Form 1099 reporting requirements that was included in the Patient Protection and Affordable Care Act and the Small Business Jobs Act of 2010.
Landlords, business owners and company managers were concerned with the excessive reporting necessary under the expanded requirements due to the increase in paperwork and compliance issues.
Rental property owners were set to start complying with the new set of rules this year, while other business owners were scheduled to start complying in 2012. Thankfully, the onerous reporting requirements have been repealed and are no longer required.
While the 2010 changes have now been repealed, this does not, however, remove all 1099 reporting requirements. Under the longstanding rules, businesses are still required to report different types of payments so that income is properly reported. When a business pays any payee for services rendered in the amount of $600 or more throughout the calendar year, the business must file a Form 1099-MISC with the IRS to report the total amount paid in that year. The taxpayer also receives this statement and must report it on his or her tax return.
Thanks to this newly-signed 1099 Taxpayer Protection Act, none of the attempted 1099 reporting changes will take effect. So if your business is currently handling 1099s and payee statements without any problems, you can continue conforming to the previous filing requirements.
Penalties for failing to file 1099s and issue payee statements were increased by the 2010 law. The increased penalties remain in effect. The IRS can still assess a penalty of $200 or more each time you fail to file a 1099 and issue the related payee statement.
Consult with your tax advisor if you are unsure about the implications of this new law, or please call our office at (805) 963-7811 or email Grace Stalica at firstname.lastname@example.org for assistance.