NEW 1099 RULES LOOMING

These rules are why no 1099 filing is required for say, the electric bill to the power company or the purchase of a piece of equipment.  Unfortunately, these two rules will change soon. 

The 2010 Health Care Act provides that, for information reporting purposes, "person" includes any corporation that is not exempt from tax.

Thus, a business is required to file an information return for most payments aggregating $600 or more in a calendar year to a single payee (other than a payee that is a tax-exempt corporation).  This new rule applies in 2013.

Example:

R, a calendar-year taxpayer, is engaged in the trade or business of being a law firm.  In 2011, R pays D Corp., a calendar-year taxpayer, $12,000 to rent an office to conduct the law firm business.  R is not required to file a 1099 with IRS for the $12,000 payment made to D.

Example:

The facts are the same as in the example above, except that R pays the $12,000 rent to D in 2013.  R will be required to file an information reporting return with IRS for the $12,000 payment.

The 2010 Health Care Act also adds "amounts in consideration for property" and "gross proceeds" to the pre-2010 Health Care Act categories of payments for which an information return to IRS will be required if the $600 aggregate payments threshold is met in a tax year for any one payee.  This applies to payments made beginning in 2012.

Example:

X Corp, a calendar-year taxpayer, is engaged in the trade or business of manufacturing.  X purchases a used automobile from Y, an individual, for $1,000 in 2010.  The $1,000 is an amount paid in consideration of property.  X is not required to file an information reporting return with IRS for the $1,000 payment made to Y.

Example:

The facts are the same as the example above, except that X buys the automobile from Y in 2012.  X will be required to file an information return with IRS for the $1,000 payment of gross proceeds, setting forth the amount paid ($1,000).