This repeal eliminates the need for excessive bookkeeping and paperwork required by previous 1099 reporting acts.
As a result of last year’s health care reform legislation, the simple task of purchasing a new office desk and chair for your business would have required filing a 1099 form. The Patient Protection and Affordable Care Act expanded 1099 reporting to include payments of $600 or more to corporations as well as payments made for property and other goods.
The Small Business Jobs Act made similar expansions, requiring individuals receiving rental income to issue a 1099 to any service provider, such as a plumber or contractor, for payments of $600 or more. Any individual receiving rental income “shall be considered to be engaged in a trade or business of renting property” (Sec. 6041(h)). In other words, this act extended reporting requirements to individuals who owned rental properties but were not necessarily real estate professionals.
The above acts, set to take effect in 2012, were estimated to recognize an additional $22 billion of income that was previously unreported. However, the requirements set forth were regarded by many as an unnecessary bookkeeping burden. On April 14, President Obama signed the legislation to repeal these reporting requirements.
As a result of this repeal, 1099 reporting has essentially reverted to its original state before either act could have an impact. You should continue filing 1099s as you have in the past. For example, businesses must still file a 1099 form for services rendered, but not for goods purchased. Similarly, individuals owning rental property will not be subject to the same burdens of reporting as real estate professionals.
To offset the loss in revenue resulting from the repeal, the legislation increases the amount of credit that taxpayers must repay on government provided healthcare subsidies. These subsidies are tax credits paid in advance based on the previous year’s reported income. If an individual earns more income than anticipated, and thus receives a larger subsidy than necessary, they will be required to repay at least some of that credit.
The 1099 Expansion Repeal is a somewhat complex subject matter; therefore, one should consider seeking the guidance of a skilled tax advisor. The professionals at Stone Carlie have significant expertise in all aspects of tax law and would be more than happy to discuss your business’s specific tax situation in greater detail. For more tax news impacting your business, check out the Stone Carlie blog.
Article Source: http://www.articlesbase.com/accounting-articles/small-businesses-find-relief-in-the-1099-expansion-repeal-4670931.html
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