New Tax Law Did NOT Repeal 1099 Reporting Requirements

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Published August 2011

Despite efforts by some members of Congress, the burdensome 1099 reporting requirements for businesses and rental property owners were not repealed as part of the new law passed on December 17, 2010. And Congress has adjourned for the year so a repeal of the requirements will now have to wait for the new Congress to take up the issue in 2011.

The new requirements were part of two laws passed in 2010:

1. The Patient Protection and Affordable Care Act imposes surprising new Form 1099 reporting requirements. Complying with them may add significantly to the paperwork burden of businesses and other organizations. Beginning with payments made in 2012, businesses generally will have to issue Form 1099s to vendors (including corporations) and the IRS for purchases of $600 or more in property or services.  

Earlier this year, IRS Commissioner Douglas Shulman said business transactions conducted using credit and debit cards would be exempt from the requirements. These transactions will already be covered by other new reporting requirements on credit and debit card processors, so there is no need for businesses to report them as well, Shulman said.

2. The Small Business Jobs Act requires taxpayers who receive rental income to issue 1099 forms to service providers when they make payments of $600 or more during the year. Beginning on January 1, 2011, the law requires rental income recipients to follow the same reporting rules as taxpayers engaged in a trade or business. Result: If recipients of rental income make payments of $600 or more to a service provider while earning rental income, they must provide a 1099 form to the provider and the IRS.

Beginning January 1, 2011, taxpayers with rental property income must start keeping records of payments, so they can issue 1099 forms in 2012. For more information about your situation, consult with your tax adviser.

Bottom line: Despite a push by the business community and some members of Congress to repeal the rules, they stay in place — for now. Efforts to eliminate them, or make them less burdensome, will have to wait for Congress to return after the holidays. Stay tuned.