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IRS Form 1099 Filing Requirements - New Update
SENATE PASSES 1099 REPEAL AMENDMENT
On February 2, 2011, the Senate adopted an amendment to legislation reauthorizing the Federal Aviation Administration (FAA) repealing of the new IRS Form 1099 reporting requirements enacted as part of the health care law (see below for details about the law).
Because revenue measures must originate in the House of Representatives, the fate of the amendment is unknown. House Republicans have made 1099 repeal one of their top priorities, but it is unknown if the Senate amendment will be accepted by the House.
The amendment, sponsored by Sen. Debbie Stabenow (D-MI), completely repeals the expanded 1099 reporting requirement in the new health care law and pays for the repeal with unspent appropriated funds, or already appropriated money from various federal agencies, as directed by the Office of Management and Budget. The amendment passed 81-17 with unanimous Republican support and 34 Democrats voting in favor.
“Today we provided a common-sense solution for business owners so they can focus on creating jobs, not filling out paperwork for the IRS,” Stabenow said after the vote. “Since last year, I have worked with my colleagues on both sides of the aisle to address this problem. If left unchecked, 40 million small businesses would see their IRS 1099 paperwork increase 2,000 percent.”
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New IRS Form 1099 Reporting Requirements included in New Health Care Law
Beginning in 2012, organizations will be obligated to provide a copy of IRS Form 1099 to all for-profit vendors and service providers that are paid more than $600 for goods or services in a calendar year. The previous exception for “corporate payees” no longer applies.
Included is the expansion of the requirement to cover payments for purchase of goods. Previously, only service payments triggered the reporting obligation for miscellaneous income. The expanded provision is effective for payments made after 2011, but the IRS recently invited payers to voluntarily comply with the new requirement for payments made in 2010. Failure to comply after 2011 results in a penalty of $50 per unreported payee, or $100 per form if the failure to file is intentional.
The expanded requirement will result in additional record keeping to report third-party payments. Organizations will need to collect taxpayer identification numbers for payees and make sure to have current addresses.