BrianB (California)
Posts: 2,820
Posts: 2,820
Posted:
Think it was tough getting a 1099 sent out each year to your landscaper, pest control sprayer, and accountant? Get ready to send 1099's to Costco, Walmart, Staples, your utility company, etc..
Starting in 2012, businesses will have to treat corporations like a contract worker and issue a 1099 tax form whenever they spend more than $600 a year. So, if your organization regularly buys more than $50 per month at Office Depot or Starbucks, or purchases one new laptop from Dell or Apple, you'll need to send these companies a 1099 form.
The new reporting requirement was a little-noticed provision buried in the 2009 health care reform bill, the Patient Protection and Affordable Care Act (HR 3590). According to §9006, the Internal Revenue Code (26 USC §6041) will be revised to require a 1099 form to be completed when a business pays over $600 in a year for "rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds fixed or determinable gains, profits, and income" (with some exceptions).
Although the 1099 rule currently applies only to payments made to a "person" for services, the revised law will additionally cover payments for all goods and equipment, and specifies that "the term 'person' includes any corporation" that isn't a §501(a) tax-exempt organization.
Besides adding a significant administrative burden at tax time (including collecting the corporate name and taxpayer identification number for every vendor), the primary goal of the new reporting rule is to raise federal revenue by increasing compliance with existing tax laws. The idea is for Uncle Sam to make more money collecting its share of the "underground" cash economy and what some estimate to be a $100 to $300 billion annual gap between what businesses do and what they report to the tax collector.
Starting in 2012, businesses will have to treat corporations like a contract worker and issue a 1099 tax form whenever they spend more than $600 a year. So, if your organization regularly buys more than $50 per month at Office Depot or Starbucks, or purchases one new laptop from Dell or Apple, you'll need to send these companies a 1099 form.
The new reporting requirement was a little-noticed provision buried in the 2009 health care reform bill, the Patient Protection and Affordable Care Act (HR 3590). According to §9006, the Internal Revenue Code (26 USC §6041) will be revised to require a 1099 form to be completed when a business pays over $600 in a year for "rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds fixed or determinable gains, profits, and income" (with some exceptions).
Although the 1099 rule currently applies only to payments made to a "person" for services, the revised law will additionally cover payments for all goods and equipment, and specifies that "the term 'person' includes any corporation" that isn't a §501(a) tax-exempt organization.
Besides adding a significant administrative burden at tax time (including collecting the corporate name and taxpayer identification number for every vendor), the primary goal of the new reporting rule is to raise federal revenue by increasing compliance with existing tax laws. The idea is for Uncle Sam to make more money collecting its share of the "underground" cash economy and what some estimate to be a $100 to $300 billion annual gap between what businesses do and what they report to the tax collector.