Businesses need to anticipate a flurry of 1099s in 2012. Hidden deep within the recently enacted healthcare reform bill are new 1099 reporting requirements that will place significant demands on your time and resources. With this one tax change, you could find yourself filing hundreds more 1099s just to comply.
Under current law, you are required to record the income payments you make each year to non-employees on a 1099-MISC form. When the total payments to independent contractors, consultants, attorneys, vendors, healthcare professionals, trainers, freelancers and other non-employees exceed $600 in a calendar year, you issue a 1099 to the individual and file it with the IRS.
Beginning next year, many more payments will be subject to the expanded 1099 rules. For the first time, you’ll also issue 1099s to corporations - and for virtually all goods that exceed $600 in a calendar year.
When you consider all the payments you make in the course of running your business – from computer equipment and office supplies to janitorial services and overnight package delivery – you realize just how many 1099s this will entail.
Why the health care reform bill contains a 1099 change ...
The obvious question for most businesses is, “How did this sweeping tax change end up in the health care reform bill?”
Blame it on the burgeoning federal deficit. The tax change is expected to help the IRS capture an estimated $345 billion in new tax revenues, as well as offset the cost of the historic health care legislation. The reporting requirements have been on the IRS’ radar for a long time, and they finally made it in the health care reform bill.
Plan ahead so you're fully prepared
While we won’t know the ultimate impact of the new law until the IRS issues its final regulations, we do know it’s not too soon to plan for how you’ll manage the spike in 1099 filings. Stay tuned for more details on the new requirements, as well as tips for easing the paperwork burden.