Form 1099 Reporting Requirements
- May 18, 2011
- David Greene
- Comments Off on Form 1099 Reporting Requirements
Up until last year, the requirements for a buyer reporting payments to a seller have always been that if you pay someone who is not a corporation, LLC or similar entity more than $600.00 in a year year, you must file a Form 1099 information reporting form with the IRS on that person. This is usually affects work done by small sole proprietor businesses. It is a way for the IRS to monitor how much money the individual makes.
For instance, if I hire Mr. Painter (who works for himself) to paint my house and I pay him his price of $1,200.00, I do not hold out any income tax on him. I pay him the entire fee. Since he is not incorporated and I paid him more than $600.00 the IRS says I must file a Form 1099 with the IRS showing that payment. The same is true if I paid him for several smaller jobs throughout the year that totaled more than $600.00.
Of course, if someone works for wages, his income is taxed immediately, but someone who works for himself must pay his taxes through estimated tax payments and the balance when he files his return.
A new law was passed last year that stated that, beginning in 2012, everyone must file Form 1099 on everyone who does work for you (except for wages) no matter whether a corporation or individual and no matter what the total paid. The law putting these burdensome requirements in place was a portion of the Patient Protection and Affordable Care Act.
A new law was just passed by Congress that repealed those reporting requirements. The law that repealed the reporting portion of the Act is the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011. Therefore, for now, the old rules still apply.