Health Care Reform’s Tax Change Creating Headaches

The media might be putting the news to the extreme in the article, Health care law's massive, hidden tax change from CNNMoney.com, but yes, it looks as though a provision of the health reform law is creating some extra paperwork for business owners.

Section 9006 of the health care bill states that beginning in 2012 all companies will have to issue a 1099 tax form to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

IRS Form 1099s are currently used to document income for contract workers (meaning non-employees). The change in how 1099s will be used is twofold: it expands their scope by using them to track payments not only for services but also for tangible goods, and it requires that 1099s are issued to corporations, not just individuals. Yes, expanding the definition of person to include corporation means more reporting requirements, not to mention the enormous amount of paper and postage involved, and that can be fairly burdensome especially for small businesses.

People are also concerned, however, that this will mean any retail purchase a freelancer does at a major store or every routine purchase a business makes, they will need to send a 1099 to that supplier at the end of the year tallying up their purchases. However, Tax Girl, in her blog today feels like I do: when the IRS regulations come out routine purchases and large retailer corporations may be excluded.

The phrase in the new law that’s likely to ease the potential reporting chaos:

“The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.”

The IRS will hold public hearings on any proposed regulations and give you, as a taxpayer, the right to put in your two cents. They usually accept public comment via US mail and email. Take advantage of the opportunity to make your voice heard if you feel the added paper work is too much or you are not happy with the regulations. Since the new law is effective January 1, 2012, you will likely see proposed regulations and public hearings in 2011.

Read more here.

Looking for that 1099? Some 1099 Forms Will Arrive Late

At least five major brokerage houses, Morgan Stanley, Merrill Lynch, Wachovia Securities, Edward Jones and Raymond James, are delaying the mailing out at least some 1099 forms. They have received a month long extension from the IRS, and hope the extra time will avoid errors created by recent tax law changes. Two other brokerage houses, Fidelity and A.G. Edwards, plan to mail the forms out on time, but warn that some will need corrections. For more information visit USAtoday.com.