Q: Are there any changes to be aware of regarding 1099s for 2011?
A: A provision in the healthcare reform law states that, beginning in 2012, anyone paying a service provider or corporation more than $600 will have to report it on the 1099 form. While efforts were made late last year to repeal this provision (Section 9006), it currently still stands. This new reporting requirement would cost small businesses both time and money associated with the additional paperwork. For example, currently you would provide a 1099 to a service provider who was not incorporated — such as a freelance designer — but you would not issue a 1099 to a local printing company for printing your catalog. However, unless this provision is repealed, companies will be required to issue a 1099 to all vendors beginning next year. This is why small business is having a heart attack about it. Can you imagine the volume of paperwork?
On January 25, President Obama acknowledged that this provision needs to be fixed in his State of the Union address, and several bills have already been introduced in both the House and Senate with bipartisan support. Some sort of repeal is expected; but, for the time being, businesses will be required to report payments made for goods and certain services to the IRS using tax form 1099 for anything more than $600 beginning in 2012. Be sure to discuss this change with your tax professional to ensure you are in complete compliance with the law.
Clear as mud? If so, here is a good article on the 1099 provision.