Expanded Form 1099 Reporting Requirements Repealed

On April 14, President Obama signed the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, which repeals expansion of Form 1099 reporting under 2010’s Patient Protection and Affordable Care Act and Small Business Jobs Act.

Background
The Patient Protection and Affordable Care Act included a provision that broadly expanded the mandatory filing of Form 1099, beginning for payments made after Dec. 31, 2011. The provision generally would have required businesses to report any payments to vendors that exceeded $600 in a calendar year.

The Small Business Jobs Act introduced another expansion of Form 1099 reporting that took effect for payments made after Dec. 31, 2010. This expansion would have affected taxpayers who receive rental income from a “passive” real estate investment, such as a vacation home. Previously, only taxpayers in the trade or business of rental properties were required to file Form 1099, but, under the new law, the IRS considered taxpayers who own one or more rental properties to be a “business” for Form 1099 purposes.

Potential Impacts
These expanded requirements likely would have created significant burdens for businesses and many property owners by dramatically increasing the number of necessary filings. In addition, affected businesses and property owners would have been responsible for obtaining taxpayer identification numbers from every payee that required a Form 1099. If a business was unable to obtain this information, it would have been required to withhold federal income taxes from payments to that payee and forward them to the government.

Repeal
The repeal of the expanded Form 1099 reporting requirements reduces the burden on taxpayers, specifically business and property owners, who were facing increased paperwork or risking IRS
penalties for failing to file a newly required Form 1099. If you have any questions, please contact your Elliott Davis tax advisor.

This publication is for informational purposes and does not contain or convey tax advice. The information should not be used or relied upon in regard to any particular situation or circumstances without first consulting a tax advisor.