According to Carr, Riggs, & Ingram, CPA’s, last year, congress passed legislation that would expand the mandatory filing of Form 1099. The provisions to do so were found in last year’s Patient Protection and Affordable Care Act (PPACA), and the Small Business Jobs Act (SBJA). What would you call a bill that would streamline the use of the 1099? The “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.” This was signed into law by President Obama on April 14, 2011.
A 1099 is usually filed if payments of $600 or more are made to a single payee by a payor’s trade or business. Exceptions in the past have included payments to most corporations and payments for supplies and merchandise. The PPACA would have expanded reporting to include vendors that exceeded $600 in a calendar year. The SBJA would have included taxpayers who receive rental income from a “passive” real estate investment. That means if you owned a second home, a cabin, condo, or vacation home that you rented out from time to time, that you might have to file a 1099. Before this law, only those who were in the trade or business of rental properties would have to file. These two changes would have dramatically increased the number of 1099?s that would have to be filed and would have been a real burden to businesses as well as individuals.
It is important to note what was not repealed by this legislation. The SBJA dramatically increased the penalties for failing to timely file a proper 1099. As an example, the calendar-year maximum penalty for failure to provide timely information was increased from $15 to $30, and the calendar-year maximum was increased from $75,000 to $250,000. That is a hefty increase. Similar increases were made across the board giving the IRS even more powerful teeth on the proper reporting of 1099?s.
So even though it is not as bad as it could have been, be very careful that you abide by the rules for filing a 1099. We would advise you contact your CPA to be sure you are properly doing so to avoid a costly penalty by the IRS.