Truax.net: Good News – 1099 Repeal Bill Becomes Law
- Author William D. Truax
- Published December 4, 2011
- Word count 474
As part of the health-insurance reform legislation of 2010, Congress enacted new law which would have mandated: 1) that all businesses file 1099 forms on all vendors or service providers with whom they did $600 or more of business; and 2) that 1099s be filed on any and all rental property expense payments where the payments to any one vendor or service provider totalled $600 or more. Included in this was a repeal of the long-standing exemption from reporting which applied to corporations. In other words, taxpayers who must normally file 1099s to report payments have traditionally not had to report them if the recipient of the payment was a corporation, but this exemption was to be repealed.
The net effect of this new law, which was to take effect January 1, 2012 as regards payments by businesses and January 1, 2011 as regards payments made by owners of rental property, was to mandate that 1099s be filed on ALL payments to vendors where the vendor received $600 or more in any year, regardless of the nature of the relationship, the type of payments, etc. As an example, if your business bought more than $600 worth of goods from the office supply store, or bought more than $600 of gas from one gas station, a 1099 would need to be filed. These rules would apply to any vendor, which would have massively increased the paperwork burden on businesses and landlords of all sizes, big and small.
Failure to file these mandated 1099s would open the taxpayer to two potential dangers: a separate penalty for failure to file each 1099 which the IRS asserted should have been filed; and a disallowance of deductions for those expenses claimed on a tax return which were not "covered" by a 1099.
Fortunately, some sense prevailed in Congress, and the Comprehensive 1099 Tax Protection Act of 2010 was passed and signed into law, repealing these requirements. Repeal means that the preexisting 1099 reporting rules for business payments continue unchanged. In particular, businesses and rental property owners must continue to issue Form 1099s for payments of $600 or more to service providers. Additionally, repeal means that the long-standing exception to required information reporting for payments made to corporations remains intact.
However, note that the exception for payments made to a corporation is not universal. The exception does not apply to payments made for attorney’s fees, and amounts paid to a corporation that provides medical or health care services (subject to certain exceptions).
Finally, please be aware that it would be irresponsible of us to allow you to assume that’s all there is to know about this subject. As with any tax law, there’s lots of exceptions, qualifications and "gotchas" which can change everything. The purpose of this article is to make the reader aware of situations in, and changes to, tax law and how it’s interpreted and enforced, and not to act as an authoritative guide.
William Truax, tax practitioner & financial consultant for 30 years, is founder of William D. Truax E.A. Tax Advisors (http://www.truax.net) in Glendale, CA--experts at tax prep, planning & representation. See more info at http://www.truax.net/?page_id=9 and his blog at http://www.truax.net/?cat=1
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- The Advantages of Incorporation for Realtors: Safeguarding Your Financial Future
- 10 essential tax-saving strategies for landlords: Maximise your rental income
- A Comprehensive Guide to Navigating the Process and the Role of Customs Brokers in the UK
- Outsourced Accounting Services for UK Businesses: A Cost-Effective Solution for Financial Management
- Top 8 Self Assessment tax return software
- How to Close a Limited Company in the UK
- Maximizing Your Finances: Unleashing the Power of CPA Services
- VAT penalties – New rules
- TAX-FREE STRATEGIES IN AN UNCERTAIN ECONOMY
- 2022 Energy crisis and failure to connect Reality.
- When Are Corporate and Personal Taxes Due in Canada in 2021?
- You Would Never Have Thought That Having Accounting Internship Could Be So Beneficial
- ACTIVATION OF UAN
- Focal motivations behind getting a Tax direct for Small Business Firms
- Avoiding the flood — tax issues with water rights in agribusiness
- Social security benefits for a family (COVID-19)
- How to use QuickBooks Component Repair Tool?
- Do you want to reduce your taxes for next year?
- Will you be responsible with your tax refund?
- Getting started with QuickBooks Enhanced Payroll in Brief
- Are DSTs Right For Your 1031 Exchange
- Tax Return Makeovers By Kenya Woodard
- Why have all crypto tax attempts failed?
- Are You a Corporation? Know Why Consulting a Tax Accountant Is Vital
- Share capital or share premium for your Dutch company?
- Everything investors should know about 1031 sponsors
- Why is the income tax so high in UK?
- Should I do my own tax return?
- Get More Money Back on Your Tax Return with help from the Tax Cuts and Jobs Act
- Don’t Fall Victim to these 3 Tax Scams in 2018