The BizFilings blog covering business tips and trends.
How Will the Change in Taxation Affect Your Small Business?
Published on Aug 24, 2010
Read 'How Will the Change in Taxation Affect Your Small Business?' at 'Time to Start Up,' the small business blog by BizFilings.
Did you know there's a new tax provision tucked in the health care bill passed earlier this year that could carry an impact on your small business?
The Patient Protection and Affordable Care Act requires that all companies issue 1099 tax forms to any corporation or individual - not just to contract workers - from which they buy more than $600 in goods or services within a given tax year. This law is effective for purchases made in 2012 that will be reported on 1099 forms filed in 2013.
According to CNN Money, "the bill makes two key changes in how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations."
Bill Rys, tax counsel for the National Federation of Independent Businesses, also said, "It's a pretty heavy administrative burden, particularly for small businesses without large in-house accounting staffs."
So under the new rules, if you buy a costly new guitar to support your career as a musician, you will have to send the retailer a 1099 at the end of the year for that purchase. If you run a floral shop, you will have to send 1099s to each of your suppliers. The more sources you rely on for your business, the more 1099s you will have to issue.
Do you need the Advil yet?
Karen Kobelski, our general manager at BizFilings, recently addressed this issue in a press release. She said, "Incorporating adds a layer of credibility which could be critical as companies may look to reduce the number of companies they conduct business with to alleviate 1099 paperwork. Formalizing a business as a corporation or LLC may help small business owners compete on a more level playing field with larger competitors."
To learn more about incorporation and its benefits when stacking up against the competition, just visit our Learning Center at BizFilings.com.
How do you think this law will impact your business?