Taxpayers got some good news in April 2011 when Congress passed, and President Obama, signed legislation to repeal expanded information reporting requirements. The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repealed expanded business information reporting requirements previously scheduled to take affect for payments made after December 31, 2011 and also repealed rental property expense reporting which was effective for payments made after December 31, 2010.
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The two (now repealed) information reporting requirements were enacted by Congress in 2010. Both were intended to boost tax revenues. Research has shown that taxpayers are more likely to report their tax liabilities when they know that the same information has been provided to the IRS by a third party.
The Patient Protection and Affordable Care Act (PPACA) generally required all businesses, charities and state and local governments to file an information return (Form 1099) when they made annual purchases aggregating $600 or more to a single vendor, other than a tax-exempt vendor, for payments made after December 31, 2011. The PPACA also repealed the longstanding reporting exception for payments to a corporation. The IRS was planning to issue regulations on the expanded business information reporting requirements but repeal of them makes the regulations unnecessary.
The Small Business Jobs Act of 2010 required information reporting by landlords on certain rental property expense payments of $600 or more in conjunction with their rental properties made after December 31, 2010. The types of expenses contemplated by the 2010 Small Business Jobs Act were, for example, payments to craftspersons, such as electricians and roofers. Payments for professional services, such as to accountants, also would have been covered by the 2010 Small Business Act.
Both of these provisions generated significant controversy after their enactment. Small businesses, in particular, complained that the requirements would be costly and burdensome. On March 3, 2011, the House approved the 1099 Comprehensive Taxpayer Protection Act. The Senate approved the bill on April 5, 2011 and President Obama signed the bill into law on April 14, 2011. The passage of the bill means that the expanded information reporting requirements under the PPACA are repealed as if they had never been enacted. Likewise, rental property expense reporting under the 2010 Small Business Jobs Act is repealed as if it had never been enacted.
Here is an overview of who currently has 1099-MISC reporting requirements. The Form 1099-MISC reporting rules apply to any business (whether a sole proprietorship, partnership, or corporation) that makes a reportable payment in the course of its trade or business. A person who, in the course of a trade or business, makes a reportable payment at the time a fixed or determinable payment of salaries, wages, commissions, fees, and other forms of compensation for services rendered aggregating $600 or more is made.
The Patient Protection and Affordable Care Act (PPACA) generally required all businesses, charities and state and local governments to file an information return (Form 1099) when they made annual purchases aggregating $600 or more to a single vendor, other than a tax-exempt vendor, for payments made after December 31, 2011. The PPACA also repealed the longstanding reporting exception for payments to a corporation. The IRS was planning to issue regulations on the expanded business information reporting requirements but repeal of them makes the regulations unnecessary.
The Small Business Jobs Act of 2010 required information reporting by landlords on certain rental property expense payments of $600 or more in conjunction with their rental properties made after December 31, 2010. The types of expenses contemplated by the 2010 Small Business Jobs Act were, for example, payments to craftspersons, such as electricians and roofers. Payments for professional services, such as to accountants, also would have been covered by the 2010 Small Business Act.
Both of these provisions generated significant controversy after their enactment. Small businesses, in particular, complained that the requirements would be costly and burdensome. On March 3, 2011, the House approved the 1099 Comprehensive Taxpayer Protection Act. The Senate approved the bill on April 5, 2011 and President Obama signed the bill into law on April 14, 2011. The passage of the bill means that the expanded information reporting requirements under the PPACA are repealed as if they had never been enacted. Likewise, rental property expense reporting under the 2010 Small Business Jobs Act is repealed as if it had never been enacted.
Here is an overview of who currently has 1099-MISC reporting requirements. The Form 1099-MISC reporting rules apply to any business (whether a sole proprietorship, partnership, or corporation) that makes a reportable payment in the course of its trade or business. A person who, in the course of a trade or business, makes a reportable payment at the time a fixed or determinable payment of salaries, wages, commissions, fees, and other forms of compensation for services rendered aggregating $600 or more is made.
Although they do not operate for gain or profit, nonprofit organizations are considered to be engaged in a trade or business and are subject to the Form 1099-MISC reporting requirements. Payments to corporations (including S corporations) need not be reported unless the payments are for medical and health care payments, fish purchases for cash, attorney's fees, gross proceeds paid to an attorney, payments by a federal executive agency to vendors for services, or substitute payments in lieu of dividends or tax-exempt interest.
If you have any questions about the above information please do not hesitate to contact your local Hill, Barth & King office.
Brenna Abbott, CPA is a Senior in the Naples, Florida office of Hill, Barth & King LLC.
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