The Devil is in the Details
HR3590, or as most people know it “the healthcare reform bill,” has some items in it that don’t just concern healthcare. As it’s often said, the devil is in the details. This is especially true with bills passed by Congress. One of the items hidden into this bill (in section 9006) is the new IRS requirement for 1099s.
Currently form 1099-MISC must be submitted by businesses to vendors, subcontractors, independent contractors, and others paid $600 or more per year. Starting with the year 2012, 1099-MISC reporting is expanded in two ways. First, reporting will be expanded to include payments made to corporations. Secondly, reporting will be expanded to include payments for property.
The first expansion will of course require the issuance of several more 1099s, but what about the second? What does “property” mean? The IRS Commissioner, Douglas Shulman, mentioned this expanded 1099-MISC reporting requirement.
“Congress also recently passed a new information reporting provision requiring expanded information reporting on payments made from businesses to corporations, and on payments businesses make for goods. This new information reporting requirement applies if businesses pay a single entity $600 or more per year in aggregate for these types of transactions starting in 2012.”
The key word there is “goods.” This would mean that businesses would be required to send a 1099 to anyone that they paid $600 or more for either goods or services for the entire year. Think Staples for stationery items, Poland Spring for water delivery, the IT company for servicing your computers, etc., etc. That’s a lot of 1099s.
How to prepare
According to the Mayan calendar, the world will end in 2012. Just in case it’s wrong, we strongly recommend that businesses begin planning now for these new requirements. All businesses should have a computerized accounting system, even if it’s a simple one (for audit trails, customer and vendor information, financial analysis, etc). This becomes even more important in anticipation of the forthcoming 1099 requirements. In particular, it is important to ensure that accounting systems are keeping track of all payments issued throughout the year and the name, address, and taxpayer identification number of the payee. It’s also a good idea to request a Form W-9 from all vendors, contractors, etc. which will provide you with their legal name, address and taxpayer identification number.
Hunzinger Accounting & Financial Solutions can help you find an accounting system to fit both your business needs and your budget. Give us a call at 631.734.8016 and we will help you prepare for the devil in the details of HR3590.