Could you make that invoice $599, please?
By Timothy Brady
Are you prepared for 2012? Now, some may think I’m talking about the end of the Mayan Calendar or the shifting of the earth’s poles or other catastrophic events that may or may not happen. No, what I’m talking about is a tax event as mandated by the new health care bill recently passed by Congress and signed into law by the President. Hidden in the bill on page 737 of H. R. 3590 is:
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) IN GENERAL.—Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:
‘‘(h) APPLICATION TO CORPORATIONS.—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation that is not an organization exempt from tax under section 501(a).
‘‘(i) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.’’.
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.—
Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended—
(1) by inserting ‘‘amounts in consideration for property,’’ after ‘‘wages,’’,
(2) by inserting ‘‘gross proceeds,’’ after ‘‘emoluments, or other’’, and
(3) by inserting ‘‘gross proceeds,’’ after ‘‘setting forth the amount of such’’.
(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after December 31, 2011.
This has been interpreted by Chris Hesse, director of taxation at CPA firm LeMaster Daniels, PLLC, in the state of Washington, as quoted by Chris Edwards in a Cato Institute blog (http://www.cato-at-liberty.org/2010/04/26/costly-irs-mandate-slipped-into-health-bill/ ), to mean that every vendor or businessperson to which a business pays over $600 per year for products or services will be required to produce an IRS Form 1099 to those businesses for services rendered. For comparison, the current law (which is in effect until December 31, 2011) states: businesses send Forms 1099 for payments in excess of $600 for rent, interest, dividends, and non-employee services when these payments are made to entities other than corporations. Payments made to a corporation and payments for merchandise are not required to be reported. Under the new law, this all changes. 1099s are to be sent to corporations, not just individuals. It will also require 1099 forms to be sent for any service or product purchased by a business from another business.
Examples:
- If you purchase over $600 of fuel from a major truck stop chain, you will be required to obtain that fuel company’s Taxpayer Information Number (TIN) and then at year’s end you will send them a 1099 form for all your purchases for that year. Take it a step further, and say you purchased two tires from a little, rural tire shop on a weekend and you spent over $600 (not out of the realm of possibility), you need that company or individual’s TIN number. In other words, in order to file the required 1099, a business would have to get a Taxpayer Information Number (TIN) from the vendor. Under current tax law, one copy of the form is sent to the IRS, and another copy is sent to the person to whom the business made the payments.
- You stop on your travels at several different hotels during your 34-hour restart and each hotel or motel chain where you’ve spent more than $600 in that year would require you to send them a 1099.
- The same holds true for truck stops, fast food restaurants, ‘big box’ stores and anywhere you might spend over $600 in business expenses.
Keep in mind this doesn’t go into effect until January 1, 2012. But when it does, the required record keeping will be monumental. It will require your company (whether you operate a single truck or 18,000 trucks) to track the money paid to any corporation, LLC, partnership, or individual with whom you do business. It will require you to obtain each company’s TIN and then file a 1099 by January 31, 2013 with the IRS and mail a copy to the TIN’s company.
Now the more interesting twist to this is, when the IRS is asked about these new rules governing IRS Form 1099, they refer the questioner to the Health and Human Services Administration. This is according to U.S. Representative Dan Lungren (R-CA). Lungren has introduced “The Small Business Paperwork Mandate Elimination Act” to remove section 9006 of H.R. 3590. His Act states Section 9006 would place an unprecedented burden on small business by requiring any business that purchases more than $600 of goods or services from another business to submit a 1099 tax form to the Internal Revenue Service.
If you feel Section 9006 of HR 3590 would be a hindrance to your conducting business, you should contact your U.S. Representative, express your concern and ask him or her to vote for this repeal.
Good loads and good roads, everyone.
Timothy Brady © 2010
www.timothybrady.com
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