Monday, August 2, 2010
Form 1099-Misc Reporting Nightmare
Perhaps you have heard the ugly rumors of the increased mandatory reporting for payments to vendors. Unfortunately, it isn't all rumor, but it is truth. In an effort to make the health care bill "deficit neutral", the legislation included a provision that would require Forms 1099-Misc to be filed for virtually all vendor payments, including those to corporations, that exceed $600 for the year. It seems that this provision alone is anticipated to raise $17 billion of the nearly $1 trillion needed for the health care legislation. While this looked good on paper, no one attempted to consider the logistics or the cost to comply with such legislation. For example, what would be the cost to businesses to comply or better yet, could the IRS handle all of those Forms 1099-Misc. It is estimated that the provision will increase the filings by five fold. The provision is set to become effective in 2012. However, help may be on the horizon. It seems that both Democrats and Republicans are realizing this is not the best idea and something may have to be done. Rep. Dave Camp of Michigan has introduced H.R. 5893 to repeal this provision citing information that the compliance with the provision will cost American businesses more than the amount of revenue generated for the government. The cost is anticipated to be extremely burdensome to small business and small organizations. This translates into money diverted to regulatory compliance that a nonprofit should be able to use to fund its programs. At this point, we are watching Congress to see what will happen. We don't have to begin gearing up for the reporting just at this time, and have some time for Congress to save the day. Stay tuned to the final outcome on this issue and more guidance on when, or if, you will need to send a Form W-9 to Office Depot to gain their address and employer identification number.