I’m sure you’ve heard about the new 1099 requirement that will take effect in 2012.
Well here is the gist of it: until now (and until 2012) businesses have to issue 1099 forms for amounts paid to individuals over $600. This typically affects our firm the most in the area of expert witnesses/consultants – we use a lot of them, so we send a lot of 1099 forms. The new law, which is part of the health care reform bill, would expand the requirement to include corporations. In other words, in 2012 if you spend more than $600 in office supplies at Staples or WalMart over the course of the year, you would have to provide them with a 1099. If you stay in a hotel for business enough to rack up $600 at that hotel, you have to provide a 1099.
Here’s a good rundown of the new law.
As of now there is one little loophole that will help small businesses, including law firms, avoid these new requirements – use a credit card or debit card. Those transactions are exempt!
So if nothing changes by 2012, that’s the workaround – use your credit card. But make no mistake, something will probably change for two reasons. First, businesses hate this new requirement, and businesses (small and large) have a huge influence on the government. Second, think of all the additional work the new law would require for the IRS – many more forms, lots more time and money spent to enforce the requirements. Does the IRS want to do that? Of course not. Can we afford more federal workers right now? Of course not. That’s why I don’t think it’ll happen as currently proposed.
The US Treasury seems to have dropped a hint about that recently in this New York Times blog interview – (sixth question down) - “it is important to look at whether this burden is too great for businesses to manage. Treasury and IRS are sensitive to these concerns and will look for opportunities to minimize burden… we won’t hesitate to consider alternative approaches.”
So my guess is that it’s like the 2012 doomsday myth – a lot of people will fret and hide in the basement for nothing.
(Howard Zimmerle is a personal injury lawyer in the Quad Cities. He’s not a tax expert, so don’t come to him for tax advice. He can refer you to a good tax business for that. Otherwise, if you have questions or comments, contact him at 309-794-1660 or hzimmerel [at] mjwlaw.com)