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Congress Responds to Taxpayer Outcry
During 2010, Congress passed two significant expansions of the Form 1099 reporting rules.
First, the rules would have required businesses to issue 1099 forms to virtually every vendor they do business with during 2012.
Second, another set of rules would have required every landlord to issue a 1099 form to any service provider who was paid more than $600 in a calendar year starting in 2011.
Fortunately, Congress came to their senses this year in determining that these rules would cause a significant hardship for businesses and individual taxpayers. In mid-April, Congress passed and the President signed the outright repeal of both measures.
Thus, the traditional Form 1099 reporting rules are back in place. Generally, businesses will still need to issue the 1099 forms when they pay $600 or more to a noncorporate service provider. Payments include rent, commissions, and any other form of compensation paid for services.
Although the expanded rules were repealed, the increased penalties for failure to file 1099 forms is still in effect. Last year, penalties for each failure increased from $15 to $30, while the annual cap on penalties increased from $75,000 to $250,000. Therefore, it is still very important for business owners to understand and comply with the reporting rules in order to avoid these costly (and needless) penalties.
Be sure to call us with any questions.
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