new 2012 1099 filing requirement

The bill dramatically expands 1099 reporting because it wipes out just about all the exceptions to the $600 annual payment rule.

Here's a good article that has examples of what will happen when it gets implemented in 2012:

Basically, the only exception I see is when the amount is reportable on another form.

Looks as if too many people were cheating with respect to their gross receipts for inventory sold.

Credit card payments will be exempted from the business reporting them on a 1099, since the credit card company will do that.

Some of the former exceptions are retained. These include interest and dividend payments. And payments to charitible organizations that come under Section 501(a) continue to be excluded from the reporting requirement. Not that there will be a whole lot of times a business makes payments to a 501 org. But the company who pays for uniforms for the little league baseball team, with company advertising on the back, would not have to issue a 1099.

Shocking.

So let's consider a case of both individuals and businesses buying from the same store. Say office supplies and furniture, which can be purchased by both individuals for their personal use, as well as Schedule C businesses and corporations and LLC's. Suppose a lot of people pay by check, so the credit card company can't report these purchases. Only the business people report their purchases. Individuals don't report anything. So in theory the supply company could only report the gross proceeds of the business sales. One of the articles Alan posted also said the supply company doesn't have to report the business purchases under $600 as proceeds either because they won't be on a 1099-MISC.

I guess when you pay by check the bank could report the 1099-MISC, just as the credit card company could for credit card payments. So there goes the "tax break".

Seems this would be much better implemented at the bank level, rather than the payor/payee level. The two banks on each end of the transaction already have between them all the info available to issue the 1099-MISC. Just make all businesses, including sole proprietors, get and use an EIN for their business transactions.

-Mark Bole

where are these exceptions to be found? I see nothing in the statute.

How would the bank know what the check is for? What if one company is paying back principal on a loan, for example?

Read the IRS notice I referred to. It answers your question.

To me, that's not an exemption. That's merely a shift in the reporting party. The transaction still gets reported.

Interest and dividends are reported on a different document (1099-INT &

Payments to charity are not payments of recognized income.

Isn't it.

"other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045"

snipped-for-privacy@panix.com (Arthur Kamlet) wrote in news:i25e8j$cnn$ snipped-for-privacy@reader1.panix.com:

So, would a residential rental activity reported on a individual sked E be covered by this, or only a sked C/F activity? A credit card exemption would help some but even at that I will have to get a bunch of TIN and addresses to send out 1099s.

I see a flurry of paper. My real estate agent wife gets a 1099 from her broker, now will have to give a 1099 back for services she has to buy from the brokerage.

I wonder if you buy an asset and less than 100% of business use, is the $600 on the total cost of the asset or just on the business percentage?

I hope IRS is going to be ready for a lot of hand written 1099s from individuals.

scott s. ..

ok, thanks. I did look at that and the statute, and the other statutes referenced therein. I guess my question is more clearly stated as "where does it provide an exception for payments made by credit card?"

and a lot of erroneous ones to boot!

========================================= MODERATOR'S COMMENT: In the future, please trim excessive text.

From page 3 of the referenced IRS Notice:

For example, the Treasury Department and the Internal Revenue Service have already issued a proposed regulation that would allow a broad exception from section 6041 information reporting for payment card transactions that would otherwise be reportable under section 6050W of the Code, effective for payments beginning in 2011. This proposed regulation is expected to be finalized later this summer. Thus, business purchases made with payment cards will be exempt from information reporting under section 6041.

Thanks - I see that is a proposed regulation. I wonder if that makes things easier or harder. I am not sure I wouldn't want to just 1099 everything and not be concerned about what few items were paid for by credit card.

It wouldn't; in the event of audit, the recipient would have to show that some if its revenue is principal repayment.

The IRS has been known to audit bank account deposits in the past, even though some aren't taxable income.

Seth

bookkeeper for each 1099 produced, that's an exemption from the requirement of producing a 1099. My (hypothetical) small business really doesn't care what sort of paperwork American Express has to issue to Amazon.com.

Would that depend on who the company pays? Sometimes they purchase the uniforms from a clothing company, and provice them to the little league at no charge. Why would that differ from buying promotional t-shirts to hand out at a conference?

Some charities operate businesses (which sometimes are subject to UBIT).

Seth

The Small Business and Infrastructure Jobs Tax Act of 2010 specifically makes residential rental activity subject to the 1099 requirement:

"SEC. 304. INFORMATION REPORTING FOR RENTAL PROPERTY EXPENSE PAYMENTS.

(a) In General- Section 6041 is amended by adding at the end the following new subsection:

`(h) Treatment of Rental Property Expense Payments-

`(1) IN GENERAL- For purposes of subsection (a), a person receiving rental income from real estate (other than a qualified residence) shall be considered to be engaged in a trade or business of renting property."

So my assumption is that until this bill passes (it has passed the House, not the Senate), residential rental real estate activities are not subject to it.

And this bill takes effect December 31, 2010 (assuming it passes).

It gets even more complicated, IMO, if it passes, because for one year (2011) the rules will be different than in 2012. So in 2011, you will have to 1099 "Joe Plumber, contractor", but not "Joe Plumber, Inc". You have to figure out if everyone you deal with is actually a corporation or not.

| Thanks - I see that is a proposed regulation. I wonder if that makes things | easier or harder. I am not sure I | wouldn't want to just 1099 everything and not be concerned about what few | items were paid for by credit card.

I think this could be very helpful for me. I believe that in most cases the only things that would reach the $600 threshold are things I already pay by credit card. A couple of questions come to mind:

Does this avoid providing a TIN to the vendor as you would if you sent a 1099 directly? (I assume it avoids having to determine the vendor's TIN.) I suspect that the less circulation of TINs (especially if they are also social security numbers) the better.

Is any coordination with the credit card company required on the payer's part? I suppose if you have to tell the credit card company that something is a business transaction it could be a problem if in theory you aren't allowed to use the card for business.

If you have more than $600 of credit card payments to a vendor but also a few non-credit-card payments totaling less than $600 do you need to send a 1099? I think I have a situation like that, but I can change it to be all credit card if necessary. Still, it would be annoying if carelessly paying for some tiny item in cash at Staples or such triggered a reporting requirement.

Dan Lanciani ddl@danlan.*com