Small Businesses, Charities, and the Self-Employed face more Reporting Rules - Big changes to 1099 reporting in 2012
The IRS' national taxpayer advocate recently said that a provision in the health care reform law could significantly increase tax recordkeeping requirements. This will affect nearly 40 million self-employed workers, small businesses and charities starting in 2012. Each of these entities will be required to issue Form 1099s to every vendor from which they purchase more than $600 worth in goods per year. Currently, Form 1099s are currently only required for payment to independent contractors but not for goods.
According to the IRS, underreported income is a high contributor to the nation's $300 billion "tax gap" - the different between the amount owed to the government and the amount taxpayers actually pay. Nina Olson, an IRS taxpayer advocate, said she is not sure that the information revealed from the new requirement will justify the burden placed on taxpayers. Also, businesses that make "qualified purchases" from more than 250 vendors in a calendar year will be required to file 1099s electronically. Some exceptions to these rules are being considered due to their potential adverse impact on small businesses, which are already struggling to succeed in a difficult economic environment.
For more information on this topic see More reporting for small businesses.
A tax attorney will be able to provide sound guidance on what these new laws mean for the future of your business. Contact Wood, Atter, & Wolf P.A. for legal assistance.
