I have had several businesses contact me regarding rumors that they have heard about a new law regarding 1099’s.
It’s no rumor, but I’m not getting too excited just yet. Allow me to explain.
Currently, in general, a company must issue a 1099-misc to any company that provides services, that is not a corporation, that is not an employee (W-2 should be used), and the dollar amount is over $600.00.
Most common examples are accountants, lawyers, consultants – those individuals that provide your company with some type of service – no tangible goods. Other uses are for landlords, if you pay rent, you should issue a 1099 to the landlord for the amount of rent you paid that year. Finally, the other common use is for medical payments. If you pay a 3rd party provider for sick pay, or if you pay a company to do drug tests on new employees etc, you should issue them 1099s.
Simple enough. Not too complicated, not too taxing…
Enter in the proposed laws effective with the calendar year 2012.
About the only thing that remains the same is the $600 threshold. Current lawmakers want all companies to issue Form 1099 to any individual or company for any goods or services.
What that sentence just said was that your company must issue a 1099 to every single vendor they have regardless what they purchase from that vendor, regardless if they are a corporation or not.
This is huge!
Companies will go from issuing a typical 3, 4 or 5 1099’s to a hundred or more forms!
That’s the current proposed law to take effect in 2012. I personally feel that changes will be made and the lawmakers will realize just how much of a burden this will be on the small business owner. I hope that they will realize that every company will have to request a W-9 form (request for taxpayer identification number) from every vendor/supplier they do business with.
AND I hope the government will realize that same company will have to issue a like W-9 form and issue one to every one of their customers! Not to mention that these 1099 forms are printed up special for the IRS so they can’t be simply printed off your computer printer.
AND that’s assuming that your accounting software can even print them. Many software packages won’t allow printing of 1099’s unless you subscribe to a “service” or their “maintenance plan” costing again the small business owner more money that they don’t have.
Let’s hope I’m right and changes will be made prior to the 2012 deadline. If not, you better get ready for issuing and collecting more useless government paperwork!
Enjoy your end of year, this may be the last “easy” one!