New and Expanded 1099 Filing Requirement

A colleague of mine, Alan Foster of the Foster Law Group, picked up on a CNNMoney.com story regarding new requirements for when to send out 1099 tax forms.  If you own a business you should check out the article and see Alan’s comments reprinted (with permission) below.

On May 5, CNNMoney.com reported as follows:

“An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork. Section 9006 of the health care bill — just a few lines buried in the 2,409-page document–mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year. The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year. Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire. But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases. The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations. Taken together, the two seemingly small changes will require millions of additional forms to be sent out.”

The complete article is available at:

http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/index.htm.

One wonders about the mindset of people who come up with legislation and rules like this. They’ve obviously never owned or managed a small business–or, seemingly, encountered a small business they liked. They constantly impose more and more costly requirements for doing business, which we know costs jobs in the private sector, while requiring ever more and more bureaucrats to be hired at taxpayer expense to make sure we obey and do what we’re supposed to.

This report by CNNMoney.com also raises the question in my naturally-suspicious lawyerlike mind as to what other unpleasant surprises lurk in in the darkened catacombs of this “health care bill.” What does filing of Form 1099 have to do with health care?

 
The Law Office of Phillip J. Griego
95 South Market Street, Suite 520
San Jose, CA 95113
Tel. 408-293-6341
 
Original Article by Alan Foster of the Foster Law Group.
 
 

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