By Eva Rosenberg
Life just got a lot easier for business owners worried about new laws requiring them to potentially issue hundreds of extra 1099 forms to vendors in 2013, instead of the few 1099s they currently send out.
In response to the flood of objections from many industries, the House and Senate passed.H.R. 4 this week. The new legislation negated two earlier laws, which were about to put a tremendous burden on business owners. The Patient Protection and Affordable Care Act (PPACA ) included a provision requiring businesses to issue a Form 1099-MISC to every single vendor of goods and supplies who was paid $600 or more, starting in 2013. A provision in the 2010 Small Business Jobs Act required rental property owners to start issuing 1099-MISC forms to anyone who provided services to the property – effective this year.
Although the new laws that related to all vendors wouldn’t have gone into effect until next year, companies have been setting up their bookkeeping systems this year. They also have been alerting their vendors to be prepared to provide taxpayer identification information (Form W-9) if they want to get paid in 2012.
Rental property owners have been trying to collect identification information from all their service suppliers – gardeners, pool guys, maintenance workers – for the first time ever
So, where do we stand? According to CCH, a Wolters Kluwer business, issue the 1099-MISC to the same people who always had to receive them:
- Any unincorporated individual who receives $600 or more for providing a service.
- Any law firm paid $600 or more, incorporated or not.
- Any medical or health care service providers, paid $600 or more, incorporated or not.
Should you issue 1099-MISC to LLCs? This is still a gray area, since LLCs can report their activities as corporations, s corporations, partnerships or disregarded entities. As someone who uses their service, you have no idea how they file their taxes. On the conservative side, I always advise my clients to issue 1099s to LLCs.
One important tip to avoid hostilities and hassles each January: Have all service suppliers give you a signed Form W-9 before you pay their first bill. That way, they know in advance, that they will be paying taxes on the money you pay them. They can quote their fees appropriately.
Do you think that’s an unusual problem? It’s not. You’d be shocked how many business-owners are practically attacked when they call their service suppliers to get their Social Security numbers or taxpayer ID numbers. Some vendors become incensed because they had never intended to report the income.
You’re better off knowing this now if it’s time to replace service providers who refuse to give you a signed W-9. The IRS is rejecting deductions for expenses that should have been 1099’d, where no 1099-MISC has been issued.
Readers, when will you start issuing your W-9s for this year?
Eva Rosenberg, EA, is the publisher of TaxMama.com, where your tax questions are answered. Eva is the author of several books and e-books, including the newest edition of “Small Business Taxes Made Easy,” now available at your favorite bookseller. Eva teaches a tax-pro course at IRSExams.com.