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Expanded Form 1099 Reporting Repealed

By Marcia Richards Suelzer, MA, JD | June 29, 2012

In a rare showing of bipartisan solidarity, on April 14, 2011, President Obama signed into law a repeal of the controversial and onerous provisions that expanded information reporting requirements to include all business and rental property expense payments over $600. The repeal takes effect as if the expanded provisions had never been enacted.

Form 1099 Reporting Requirements

The health care legislation enacted in March 2010 was funded in part by the now-repealed expansion in information reporting. The provision would have required businesses to file a Form 1099 for each vendor from whom they purchased a total of $600 or more worth of goods during the year, beginning with payments made after 2011. In addition, the law also repealed the long-standing reporting exemption for payments made to corporations. This expansion not only placed an exceptional burden on the small business owner to track payments throughout the year, it also created a chilling effect on the use of multiple vendors and raised the spector of increased identity theft due to the requirements to put taxpayer identification numbers on the Forms 1099.

Tip. Only the expansion of the information reporting requirements was repealed. The information reporting rules as they existed prior to the expansion remain unchanged. Businesses must continue to issue Form 1099s for payments of $600 or more to service providers (e.g., independent contractors, accountants, or business consultants.) Additionally, the long-standing exception to required information reporting for payments made to corporations remains intact.

Rental Reporting Requirements

In addition to repealing the unpopular expansion of business reporting, the law also repeals the equally burdensome, but less bally-hooed, extension of rental expense reporting contained in the Small Business Jobs Act of 2010. This provision required all landlords, not just those whose rental operations were extensive enough to be considered a trade or business, to provide a Form 1099 to each vendor or service provider to whom you would make payments of $600 over the course of the year, beginning with payments made in 2011. Rental expense was broadly defined. It included not only the obvious, such as payments made to plumbers and painters, but less obvious payments, such as those to accountants for services connected with the property.

Act Now. Unlike the business reporting requirements, the rental expense reporting requirements went into effect for payments made after 2010. Thus, if you are a landlord, you should have been collecting the required information from those providing services in connection with your rental property. With the repeal, you no longer have to collect the information. And, if you perform services in connection with another's rental property, you know longer have any obligation to provide identifying information to the landlord.

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