Over the last week, we’ve been taking an in-depth look at the health care bill and how it might impact your finances. Today we will cover the new 1099 reporting changes.
Much has been written about the impact of health care reform on small businesses. But one hidden provision of the bill that has seemingly nothing to do with healthcare will affect pretty much every business. Starting in 2012, businesses will be required to send 1099s to any individual or corporation to which they pay more than $600 per year.
Currently, businesses must send 1099s to all individuals who provide more than $600 worth of services to that business in a calendar year. Independent contractors are used to receiving this form, and paying self-employment taxes on the income.
Beginning in 2012, the 1099 changes in the health care bill will extend required 1099s to all payments over $600 made to any vendor – this applies to both individuals and businesses/corporations, and to goods as well as services. So if your gourmet basket-making business buys $900 worth of wine and cheese, you’ll have to send a 1099 to your supplier. As this Business Week article points out, the requirement will even apply to money you spend at places like FedEx or the local gas station.
If you are a business owner, prepare to spend a lot more time collecting data, keeping records, and generating/sending paperwork. And if you have previously provided goods and failed to report income, know that that will change starting in 2012.
The government hopes the changes in 1099 reporting will generate additional tax revenue on income that has previously gone unreported – and it’s in the health care bill because that revenue could potentially pay for some of the bill’s costs.
More details will be known about Form 1099 changes when the IRS releases further provisions – a date when those provisions will be released is not yet known.
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