Hidden away in 23 lines of Section 9006 of the Patient Protection and Affordable Care Act (commonly referred to as the Health Care Bill) is a dramatic change in the IRS Form 1099 reporting requirements. At present, businesses must issue a Form 1099 to all independent contractors who perform $600 or more of work for the business in a given year, but purchases from corporations and all purchases of goods are exempt from 1099 reporting. The new provision in the Health Care Bill, however, mandates that all companies will have to issue 1099 tax forms to any individual or corporation from which they buy more than $600 in goods or services in a tax year. This new law is effective January 1, 2012.
Changes to Current 1099 Requirements in Health Care Bill
The bill makes two major changes to the current 1099 requirements. First, it requires that a 1099 be issued not only to individuals, but also to corporations. Second, it expands the scope of the 1099 by using them to track payments not only for services but also for tangible goods.
For example, a large business related meal at a restaurant will need to be reported on a 1099. A small business that purchases office supplies from a local supplier of office supplies will have to send the supplier a 1099 at the end of the year totaling up their purchases. These are just two simple illustrations of the massive amount of paperwork the new law will require.
The change in the filing requirements for the 1099 will put a heavy burden on businesses and force them to issue millions of new tax documents each year. This could be an administrative nightmare for many small businesses that must implement plans and processes for dealing with this new requirement in the coming years.
Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.