A Brighter Way
A Brighter Way
Buried in the 2,409 page healthcare reform bill that was passed in March is a provision that will dramatically change the way IRS 1099 forms are used. As a result of its language, your business will need to generate a large number of new tax documents beginning in 2012.
Right now, the 1099 form documents income for individual workers other than wages and salaries. Freelancers receive them from their clients and businesses issue them to their independent contractors. Under the new rules written into the healthcare reform bill, companies will be required to issue 1099s to any individual or corporation from which they purchase more than $600 in goods or services during the tax year.
The Senate Finance Committee wrote the rules with the idea of capturing unreported income to help generate more revenue for the government and to help offset the cost of the healthcare bill. The IRS estimates the federal government loses more than $300 billion each year in tax revenue on income that goes unreported.
Besides the additional paperwork the new rules will require, businesses will also be faced with a larger concern: data collection. Your business will need to collect the names and taxpayer identification numbers for every payee and vendor that you do business with. The IRS will issue regulations on the new law sometime next year.
If you would like more information about how the 1099 rule changes will impact your business, and how you can begin to prepare for this change, please contact your financial advisor.
This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, May 1, 2010 issue.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
