New 1099 Requirements to Hit Businesses Hard

Buried in the recently enacted Patient Protection and Affordable Care Act (i.e. “Health Care Reform”) and the Small Business Jobs Act of 2010 is a hidden change to the 1099 reporting requirements that will increase the paperwork that taxpayers must file with the Internal Revenue Service.

The provisions were enacted to reduce noncompliance with tax laws by businesses under-reporting revenue from online sales and over-reporting expenditures, and a general failure to supply the required Form 1099-MISC because of uncertainty over which vendors were included in the current requirements. If it wasn’t apparent before, the information reporting requirements have become the centerpiece of IRS enforcement efforts.

Under current law, a business is required to give a Form 1099-MISC to any independent contractor who provides services and is paid $600 or greater in a calendar year (i.e. cash basis). An independent contractor is defined as a non-corporate business entity, such as a sole proprietor or partnership. For most businesses, this doesn’t create much of a burden. However, for payments made after December 31, 2011, that’s all about to change… Download PDF