1099 Reporting Requirements; What's Changed?
By Harold S. Small, J.D., CPA (inactive), AEP
The Internal Revenue Code (“Code”) imposes requirements on businesses to provide information returns to recipients of payments and also to the Internal Revenue Service (“IRS”). The requirements have been in existence for some time. However, in recent years the requirements have been expanded and those affected have increased in number. For the current requirements, see the IRS instruction materials for the forms 1099, etc. at http://www.irs.gov/pub/irs-pdf/i1099gi.pdf .
Starting January 1, 2012, businesses that issue forms 1099 to report nonemployee compensation to independent contractors will have their reporting/filing requirements increased. As of that date businesses will have an obligation to issue a form 1099 to every vendor to which they make payments totaling $600 or more during the calendar year. This is a large expansion of the compliance obligations. It will require new record keeping and businesses should start to make the necessary revisions to their accounting records now so that they will be able to timely comply with the requirements. For example, for every applicable vendor purchasers will need to obtain and match to purchases the taxpayer identification number (“TIN”) of the vendor. That information will be needed to satisfy compliance/filing obligations.
Businesses that receive these forms will need to determine how to reconcile the form information and the payments received. They will also need to be mindful of obtaining corrected forms when errors occur.
Consideration should be given to contacting your accountant for guidance relating to what needs to be done in order to be able to satisfy the new reporting/filing requirements.
THE FOREGOING CONCEPTS AND IDEAS ARE GENERAL STATEMENTS AND ARE INTENDED TO PROVIDE CONCEPTS FOR CONSIDERATION IN BUSINESS AND TAX PLANNING. CAREFUL CONSIDERATION NEEDS TO BE GIVEN BY THE READER REGARDING THE USE AND APPLICATION OF THE CONCEPTS. YOUR LEGAL AND TAX COUNSEL SHOULD BE CONSULTED BEFORE THE IMPLEMENTATION OF ANY OF THE IDEAS INDICATED HEREIN OR USE OF THE INFORMATION CONTAINED ABOVE. SHOULD YOU HAVE QUESTIONS REGARDING THIS MATTER, HAROLD S. SMALL, ESQ., CAN BE REACHED AT 12526 HIGH BLUFF DRIVE, SUITE 300 , SAN DIEGO, CALIFORNIA 92130 OR AT 858.759.4600.
© 2010 by Harold S. Small, J.D., CPA (inactive) , AEP