Business Credit Card Transactions Now Reported on a 1099

Starting in 2011, credit card companies will begin issuing a new type of Form 1099 (Form 1099-K) to some businesses and individuals.  The 1099-K will detail, month-by-month, the amount of income the business received from credit card transactions.  It will also apply to debit card transactions, and to payments processed by third-party providers such as Pay Pal.

Form 1099-K will only be issued to business or individuals who have at least 200 transactions and who receive at least $20,000 from those transactions.  The goal with these thresholds is to avoid having a 1099-K issued to someone who, for example, sells things casually on e-Bay.

View a draft of Form 1099-K at the IRS website.

New 1099 Provisions Start This Year for Rental Owners

With the new year comes a new law that applies to owners of rental properties.  For the first time, rental owners will have to issue 1099s to service providers (accountants, lawyers, unincorporated plumbers and electricians).  This applies to payments made after January 1, 2011. 

And starting on January 1, 2012, rental owners will face even stricter 1099 requirements, as will all businesses.  Starting in 2012, businesses and rental owners will have to issue 1099s to anyone and any company that they purchase more than $600 of ANYTHING from -- including purchases of goods, supplies, inventory, etc. 

Thus, if you own a rental house and you pay the utilities, you'll have to issue a 1099 to the utility company, starting in 2012.

I think Congress will provide relief to the stricter provisions that take effect in 2012.  But I think the stricter 2011 requirements on rental owners are here to stay.

Read prior coverage of the 1099 issue here, here and here.

No 1099 Relief in Tax Deal

A website visitor asks if the tax deal contained any relief from 1099 reporting for small businesses.  The answer is NO, it didn't.  But there is still hope that Congress will provide relief before the stricter reporting requirements take affect in 2012.  Both Republicans and Democrats seem to agree that the stricter requirements will be a burden on small businesses, but for some reason, they can't reach an agreement to actually provide relief.

Oh, and rental property owners:  you are subject to stricter 1099 rules starting January 1, 2011.  Rental owners have not had to issue 1099s in the past, but now they will, if they pay $600 or more to service providers (accountants, lawyers, plumbers, electricians, etc.).

Read prior Dinesen Tax Times coverage here and here.

Senate Votes Down 1099 Relief for Businesses

The Senate on Monday night failed to repeal the stricter 1099 reporting requirements that are looming for businesses.  Starting in 2012, businesses will have to issue 1099s to anyone and any company that they purchase more than $600 of ANYTHING from -- including purchases of goods, supplies, inventory, etc.  This is a major change from current law, which only requires 1099s to be issued to independent contractors and others who provide services to the business (such as accountants or lawyers).  This change was quietly tucked away in the "health care reform bill" passed earlier this year.

There has been a large amount of backlash from the business community (and rightfully so) about these new requirements. But on Monday night, the Senate twice voted down attempts to repeal the 1099 changes.  What's odd is, both Republicans and Democrats say they understand the burden this will place on businesses, and both Republicans and Democrats seem to want to do away with the changes.  But yet, they can't reach a compromise on the issue.  You can read more in this New York Times article.

You can read more about this issue in a prior Dinesen Tax Times article here.

Health Care Bill May Change 1099 Reporting Requirements

Small business owners take note: one of the provisions in the health care reform bill recently signed into law impacts the way businesses issue 1099s. Currently, a business is only required to issue 1099s to individuals who perform services for the company (independent contractors, accountants, lawyers, etc.). But a provision in the health care bill would require 1099s to also be issued to any corporation from which you purchase more than $600 worth of goods in a year.

For example, let's say you spend $1,000 at Best Buy to buy a new computer for your business. Under current law, you don't have to issue a 1099 to Best Buy, because Best Buy is a corporation, and the purchase is for goods instead of services. But the new law will require you to issue a 1099 to Best Buy, and to any other supplier or vendor you do more than $600 worth of business with. So, if you have dozens of suppliers and you buy more than $600 worth of goods from each of those suppliers, you'll be issuing dozens of 1099s.

This change is set to take affect January 1, 2012. You can read more about it here.