Congress leaves 1099 red tape firmly in place
The profession gave it a shot, but there'll be no repeal of an expanded Form 1099 reporting requirement for businesses.
The U.S. House of Representatives has failed to pass a bill that would have repealed a new rule that requires businesses to report to the IRS any purchase of $600 or more from a vendor of goods or services. The requirement is part of the health care reform law passed earlier this year and will be effective for purchases made in 2012.
The AICPA urged Congress to repeal the requirement, saying it "may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face."
"The business implementation costs associated with the likely generation and receipt of millions of forms, the difficulty of establishing that Forms 1099-MISC were actually received, and the potentially mind numbing reconciliation processes for businesses should be weighed against the uncertainty of the benefit to be derived by the government," AICPA Tax Executive Committee Chair Alan Einhorn wrote in a letter to both the House and the Senate.
Those arguments fell on deaf ears in Congress.
That leaves businesses with the same dilemma -- how to comply with a provision that, in the words of David Lifson, "could fundamentally change the way we do business and keep records in the United States."
In an exhaustive Journal of Accountancy summary of the requirement, Lifson outlines what has changed and how it impacts both small and large businesses. One passage in particular offers some interesting details:
"Implementing this change will require collaboration among businesses and software vendors and likely the help of CPAs to correctly identify, characterize and report these transactions," Lifson writes. "Purchases affected could range from inventory to payments for advertising services to the electricity bill. IRS Commissioner Doug Shulman, however, said in a speech in May that the (IRS) plans to administratively exempt business transactions conducted using payment cards such as credit and debit cards, because those transactions would already be reported by the payment processors."
Thanks to regulators, the world just keeps getting more complex, doesn't it? More than ever, CPAs need to be part of the solution.
There's certainly no shortage of work for them to do.
Share your thoughts about the new reporting requirements, then check out these resources:
- Related CPE, Nov. 30: Troublesome Tax Issues for Federal Payroll Taxes, Benefits and Form 1099s
- Related book: Tax Legislation 2010 Highlights: Health Care
- Related book: Tax Legislation 2010: Patient Protection and Affordable Care, Health Care Reconciliation, HIRE and Other Recent Tax Acts: Law, Explanation, and Analysis
- Related self-study: 2010 Health Care Reform Act: Critical Tax and Insurance Ramifications for You, Your Business, and Your Clients