New 1099 form requirements

<p>For those of us in the USA who might not be aware of the new 1099 requirements. I received this email from ASMP and thought some of you might like to add your voices</p>

<p><strong>One of the provisions of the new healthcare reform legislation will significantly impact the administrative burdens of your business unless the IRS changes it.</strong> As of now, starting next year, if you pay any person or corporation more than $600 in a year for goods or services, you must report that to both the IRS and the entity or person whom you paid. For example, if you bought a new camera or lens for $1,000, you would have to report that on your income tax returns and issue a 1099 to the company from which you made the purchase. Fortunately, there is now an exemption for credit card transactions, but that doesn't apply if you paid by cash or check.<br>

<strong>The good news is that the IRS has asked for comments from the public. Please copy and paste the sample letter below, edit it as you choose, and email it to <a href="mailto:Notice.Comments@irscounsel.treas.gov" target="_blank">Notice.Comments@irscounsel.treas.gov</a>. Please be sure that the subject line of your email says Notice 2010-51. Please note that the emails must be sent by Sept. 29, 2010.</strong><br>

We understand the government's desire to track cash transactions, but the current system would impose an unacceptable record-keeping and reporting burden on small businesses like yours.</p>

<p>Michael<br>

ps: email me if you would like a copy of the letter that they sent along</p>

<p>It's worse than it sounds, by the way. For someone to file a 1099 on the purchase of that used $600 lens, they have to collect the seller's name, street address, and social security number. A small business that does a fair amount of buying like this (my wife makes jewelry, and buys all sorts of materials - from pearls and stones to silver and older pieces) will have to collect this information from many people every year, and keep records matching those 1099s, for years afterwards. Do you trust every person to whom you've made a Craig's List lens sale to securely keep, and not mis-use the sorts of details - like your SSN - that are coveted by identity theft specialists? Me neither.<br /><br />In talking to a number of people in the precious metals business (who buy estate jewelry, gold, etc., from the public - hundreds, usually thousands of transactions a year), this will essentially put them out of business. They would have to hire full time staff just to handle the huge new clerical burden, and make arrangements for more business insurance to protect against inevitable lawsuits even if they weren't the ones to spill someone's SSN and other info to some third-party bad guy. This is going to impact people who trade in antiques, restaurants who buy from local farmers, people who restore cars (and buy, say, a used transmission), wine collectors, and on and on. It will place a colossal new productivity-draining layer of friction on small businesses, without introducing any new creativity or productivity to go with it ... other than, of course, untold tens of thousands of new IRS jobs needed to deal with data entry and the inevitable criminal enforcement actions.<br /><br />Obviously, if this now existing law stands, the cost will simply be passed along to consumers as higher prices to cover the overhead for the small companies that don't simply risk jail time by ignoring it, or who don't give up and walk away from their business. It will impact some types of work much more than others, of course.<br /><br />Perhaps the most offensive aspect of this, to be sure, is that it was slipped into the <em>health care</em> legislation. I guess this is why Mr. Baucus (one of its principle authors!) said just the other day, that no, he didn't actually read the bill - that they (Pelosi, Reid, et al) hired outside experts for that little chore.<br /><br />This is not the sort of thing that stimulates a stagnant economy. Great for CPAs and lawyers, I suppose, and for the public employee unions representing thousands of newly hired IRS staffers.</p>

<p>I haven't seen this yet, there used to be an exemption for any purchase from a corporation of any sort and also for buying merchandise--the only requirement of a 1099 was for a service--so this has changed eh?</p>

<p>I need to check this out I guess!</p>

<p>I mentioned about this requirement on photo.net a couple of times over the last two months already and got damned on a thread; and got some nasty emails too. Many folks here worship Obama and the big health care plan and if one points out the added red tape that a business is going to get many will say it is not such a big deal.</p>

<p>If you find some cool stuff on threads like these you should capture it before the thread gets nuked.</p>

<p>It is not just a business thing.</p>

<p>Here I buy and sell stuff on ebay that sometimes is above 600 bucks; thus after Jan 1 I will have to ask for 1099's for this stuff too.? ? ?</p>

<p>I wonder what happens if the guy I buy toner from off of ebay does not want to fill out the 1099; or the place I sell a lens or engineering item.</p>

<p>I wonder if this applies to PayPal payments</p>

<p>There are folks who come into my business and pay cash for items and they will not even give their name to put on the invoice. Now in a slow stinking economy I have to play 1099 cop; besides copyright cop too with printing too.</p>

<p>I suppose the folks who just pay in cash will just make up a name and SS number; and I will be caught into this BS of a 1099 that the government cannot chase down.</p>

<p>The way the law reads is like if I spend more than 600 bucks per year at the grocery store using cash I will have to give them a 1099</p>

<p>I have customers that I know that about always pay in a cash; the total is over 600 per year. Now I have to rock the boat with a 3 decade old customer and keep a running tab of their purchases for their yearly 1099.</p>

<p>This added burden just means a huge headache; how to keep track of the mess. I plan on lost customers if this plan is goes through.</p>

<p>It just means that with stuff like toner and ink; I will buy it at many more places; so the totals are less than 600 bucks.</p>

<p>One has the added 1099 costs plus the tax cuts go away next year too; a perfect storm.</p>

<p>I am NOT going to hire more folks to handle this; more like stop services that are the lower margin ones; and use existing folks.</p>

<p>The real plan is the those 1099's guide the Government to find the folks who skirt taxes with all cash businesses. Thus if Mr Doe buys stuff from me in cash and it is 1234 bucks total a year; he might just have his wife and kids buy the stuff and each of the three will be less than 600 bucks to avoid the 1099. Mr Doe might be one of those all cash Fisherman types; and now I the business owner is the devil/ahole hand of the IRS about to uncover his ways.</p>

<p>I really would not say this law was slipped into the health care thing. It has been talked about before<br>

it the the barb up the bum PURPOSELY inserted; that is common knowledge.</p>

<p>It is the change folks voted for.</p>

 

<p>April 28,2010</p>

<p>http://www.accountingweb.com/topic/tax/costly-changes-1099-reporting-health-care-bill</p>

<p>May 5,2010<br>

"The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations."<br>

http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/</p>

<p>May 11,2010</p>

<p>"In other words, pay more than $600 in a year to one company for rent, telephone, computers, or any other business expense, and the purchaser has a has a 1099 form to fill and send:"<br>

http://www.bnet.com/blog/technology-business/healthcare-bill-prescription-send-1099s-to-everyone-for-everything/3700<br>

May 24,2010</p>

<p>"The changes are also going to create an "avalanche of [new] paperwork", according to Bill Rys, tax counsel for the National Federation of Independent Businesses. Business owners are going to have to spend a lot more time tracking purchases and saving receipts, which for many is going to be a logistical nightmare that could drive them right out of business."</p>

<p>http://www.naturalnews.com/028854_1099_small_business.html</p>

<p>Unfortunately that's what happens when the author of the bill admits he never even read the bill. I'm not anti-anybody, just anti-stupid. It's a total nightmare. I don't know how the government will even deal with all the paperwork it will create.</p>

<p>The government will take the 1099's tied to Mr Doe's SS number and find he is spending more money than he makes.</p>

<p>That is the purpose of the law.</p>

<p>The IRS will them deal with folks who are spending a lot; but making zilch.</p>

<p>The IRS will "deal": then with Mr Doe with an audit .</p>

<p>The purpose is to raise tax money to help support the new programs folks wanted and voted for; ie the change.</p>

<p>Thus that old retired guy might find his pension cut; or benefits reduced as all theses 1099's are examined.</p>

<p>The fisherman and contractor types who work mostly in cash will get snared. Home Depot might find one guy is spending 4000 bucks in plywood; or a fisherman buying 2000 bucks worth of fuel or bait will now get a 1099. The fisherman and contractor now might have to start paying more taxes; like the rest of us!</p>

<p>The Government will "deal" with the massive increase in 1099's by hiring more folks; and having a massive data base tied to each persons SS number; so see where cash is flowing around.</p>

<p>They will just cull out SS numbers by folks who have little incomes but a high summation of 1099 totals.</p>

<p>This was the plan a year ago; to bring in more revenue to fund the plans to take care of everybody.</p>

<p>This is what folks wanted and voted for; ie change.</p>

<p>The government will just scan in all those 1099's or have it sent in via a PDF.</p>

<p>Thus the plan is to really cut out all the loopholes. If your old retired neighbor sells his used riding mower or 2nd car for 601 dollars; the government wants to know; to check if any tax money can be extracted.</p>

<p>It is a bunch of bull dung if a person said they did not read the bill before they signed it. This topic was talked about in the new too before the bill(s) were pushed through.</p>

<p>the new 1099 rule means that if I am at the TRW ham radio swap meet Tomorrow and buy a used radio; or wad of stuff for more than 600 bucks from one vendor; I have make out a 1099 for the guy/gal at that stall. Thus If I buy a used Icom 735 for 250 bucks from the Lady#37 in August; I will at the end of the year keep a running total to see if it breaches 600 bucks; then make Lady#37 a 1099. This means I will have to have a notebook or spreadsheet to keep the running totals through out the year from all the vendors at TRW I buy from during the entire year.</p>

<p>IF that 1099 data gets shared with the states; the state tax man might no want to check for sale tax too.</p>

<p>This really is the nightmare if it is not killed off. One has to keep track of all ones spending at McDonalds; the Hockey Rink; At Gun and Camera shows. If I take the gang of hockey kids to McDonalds several times a year I will hit 600 bucks; thus McDonalds gets a 1099 against a league or club,</p>

<p>If you shoot weddings; the total package is often way over 600 bucks; thus a 1099 is needed. If I farm out over 600 bucks worth of stuff to shop #35 for repairs; they get a 1099. An old retired guy that I get some wooden custom print boxes and holders made now will get a 1099.</p>

<p>Everybody was all excited about this bill.</p>

<p>On another thread when I bought up that some of us business owners are a bit scared about the future; several folks said it is irrational.</p>

 

<p>I can see that I will be paying most of my bills with a CC in the future--actually most are done that way now.</p>

<p>This is all a bit crazy to me because most of the unreported income, I believe, is not coming from corporations (who have to deposit checks in a bank-they can't be cashed like an individual can--thus a paper trail) and their dealings with other businesses, but more from those businesses dealing with the consumer, especially non corporate businesses--the very people who have no responsibilities to report anything!</p>

<p>The added work for me will just be that I need to remember that when I am on the road, and pay for something with a check, that I also need to get a 1099--like that is something I want to do!?! Sometimes it will be very awkward as I wont want to pay unless I get one and it might be that the office is closed (thinking aerial photo shoots here, but you get the idea). It also means a whole lot more paper to carry if I don't use the CC for some reason.</p>

<p>I run my business as a corporation and for years I have gotten 1099's from most of the advertising agencies I work with. So, I don't know how much more work it will be for them since they didn't have to do it anyway, but did. The big difference might be that it now includes physical goods as well, but I bet they have been doing this all along as well.</p>

<p>The hard part, I believe, is when a small guy, like most photographers, sometimes charges a purchase and other times writes a check to his photo store or for his phone or whatever. He has to keep two sets of books to differentiate the amounts paid?</p>

<p>If you run a business, sellers may not sell to you on e-bay or Craig's list if you need a SS number. I don't blame them for security purposes, but that wont be the only reason. It may not be that they are dodging taxes either, it may be that they bought the lens as a hobbyist--never deducted--and sold it for an effective loss to you. I don't know that that sort of transaction has ever been reportable in the past, but it will be now (they will have to prove what they paid for the item and when, when they file their taxes--how many hobbyists keep those records over a year or two?). I am sure that a lot of the income that is made in this way isn't reported though--and still wont be because they aren't going to give out their SS number--or at least their real one.</p>

<p>I mention this about the real one because almost every year, I get a notice that one of my 1099's had something wrong with it, that the SS and the name don't match. Most of the time it is just that someone uses their middle name as their first name and it gets in my records as such. The IRS informs you, but doesn't require anything of you. In such cases as an on-line sale, I can't imaging repeat business with anyone who isn't a legit, and reporting, entity anyway.</p>

<p>I don't look at this as a politically motivated thing, just not one that was thought out very well by whoever stuck it into the bill--like the idiots who want to mess with copyright protection and that Orphaned Works Act!</p>

 

<p>I do not see this as a political thing and I would like to try to keep this thread from turning into a political thing. I do see this as a bad thing for any small business</p>

<p><a href="http://fskrealityguide.blogspot.com/2010/07/1099-reporting-and-healthcare-reform.html">

<p>Politicians say "This law won't cost the government/taxpayers money! We aren't raising taxes!" The 1099 requirement isn't a tax hike. It's stricter enforcement of a law that already exists.</p>

</a></p>

<p><a href="http://www.kansascity.com/2010/08/06/2134327/did-congress-really-paper-over.html"></a><br>

<a href="http://www.kansascity.com/2010/08/06/2134327/did-congress-really-paper-over.html">"In a news release dated July 7, the IRS said, “Beginning in 2012, all businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year. …For example, if a self-employed individual makes numerous small purchases from an office supply store in a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases.</a></p>

<p>This reads like it really does not matter HOW the stuff is paid for; ie credits card; cash; check; paypay; money order.</p>

<p>Thus paying by credit card does not relieve one of the task of keeping a running total and seeing if it hits 600 bucks at the end of the year.</p>

<p>My own accountant is off at a meeting today just about this issue</p>

<p>Note that it is vague here in this IRS statement on July 1,2010:</p>

<p><a href="http://www.irs.gov/newsroom/article/0,,id=225029,00.html"> </a><br /> <a href="http://www.irs.gov/newsroom/article/0,,id=225029,00.html"> </a><br>

<a href="http://www.irs.gov/newsroom/article/0,,id=225029,00.html">

<p>"Under a proposed regulation, <strong>MANY </strong>business purchases made with credit or debit cards would be exempt from the new reporting requirement because they are already reported by banks and other payment processors. The IRS seeks comments on additional circumstances in which duplicate reporting might otherwise occur and on rules that would prevent such duplicate reporting."</p>

</a></p>

<p>It does not spell out what is and what is not; just to add to the uncertaincy</p>

<p>http://www.irs.gov/pub/irs-drop/n-10-51.pdf</p>

<p>Michael how could this not be a political thing if the horrible provision was purposely added by one party on the Senate Finance Committe?</p>

<p>The same partys leader said "“<strong>But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy."</strong></p>

<p><strong> </strong><br /> That is like saying one has to buy an expensive camera because I am too stupid to think what it is to be used for.<br /> Thus one buys an 4x5 Ebony for sports; or a Leica M for macro work; or a Aerial camera for court case shots</p>

<p>Thus many of us want thus evil bill to be burned; one inserted by folks who cannot read and think. Ie dumb folks who want the concrete to be dried then ask where do the rooms go.<br>

<br /> The country is going to hell by folks voting stuff in without any thought; it is reckless</p>

<p> </p>

<p>Kelly I see it as not being a political thing because nobody in Congress said no to it. So I see them as all being at fault.<br>

But what I was trying to do and still am is to inform people who might not know about this with out the thread turning into a political free for all.<br>

And yes I was appalled when members of congress admitted that they had not read the Health care bill that they voted for.</p>

<p> </p>

<p>As I plan to retire in 2011, and begin my journey with the Social Security system *<strong>if</strong>* it does not go broke as the wheels in Washington DC do their best <strong>to fix everything</strong>....I will really, really miss the latest IRS plan to keep business life simple.</p>

<p><em>Honest!</em></p>

 

<p>A full side of the aisle said "No!" to it. Remember, it was more important (to some) to have a rotten bill than it was to not have a bill.</p>

<p>Kelly,</p>

<blockquote>

<p>Michael how could this not be a political thing if the horrible provision was purposely added by one party on the Senate Finance Committe?<br /> The same partys leader said "“<strong>But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy."</strong></p>

</blockquote>

<p>I'm trying not to let my colors show here, but I have a problem with both sides of the aisle, like one of the authors of the McCain-Feingold campaign finance bill, who just spent $21m to blow away his opponent in AZ. It's not about one party or another, it's about the whole mess of federal government doing things like this 1099 provision.</p>

<p>I'm afraid to think what else is in just the Healthcare bill that will affect photographers. I already know I can't plan on the same health insurance. I also know a lot of colleagues who can't afford health insurance, but will be required to buy it. They already operate their photo business on very thin margins. And there are tax implications of the impending tax cuts (soon to be tax hikes) on January 1, that will impact photographers and their business expenses.</p>

<p>The whole thing about<strong> </strong><br>

<strong>"But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy."</strong><br>

<strong> </strong><br>

sounds like somebody that is all for something; but sure is not detail oriented; or the outcome if bad does not effect them.<br>

Its like when somebody gets excited about a new cellphone company or calling overseas; but does not look into the costs; thus they get a 4000 buck bill.<br>

This is what you expect with folks who are new; or the assuming types; no the so called leaders for elect; the ones folks worship.<br>

If she was retarded or drunk; then her statement might make some sense. Otherwise it is darn reckless.</p>

<p>It is sort of like "lets go ahead and launch the shuttle even if experts point out actual risky data"</p>

<p>Somebody has to stand up and clear the scum on both sides; both party's drunk fools</p>

<p>As already mentioned above; and entire side said NO to this quagmire. They had the guts; the balls to spot the rotten parts; the ones the "lets go for it" said they would read about later.</p>

<p>Now that the darn thing is ramrodded in; we have to deal with this drunk foolish 1099 stuff; unless it get removed or toned down</p>

<p>It is like if one side polked holes in the hull of the ship; and figured "they will learn about it later" were the other side point out the risks and got overruled.</p>

<p>***From a cost of doing business standpoint it just drives up costs at a bad time. One had a minimum wage increase last year?; then we have the uncertaincy know; we have higher taxes jan 1,2011. we have the 1099 thing in 2012 and heath care.<br>

It really just means some of us will let more folks go; farm out stuff even overseas to make ends meet.</p>

<p>The fact is it is not a free for all. The whole issue of the increased 1099 stuff was known; some folks read the darn fine print; while others ram rodded the bill through.<br>

I am not sure why one should defend not reading the fine print; or defend quashing others concerns before it was rammed through.<br>

What ever happened to accountability; reading; being prepared stuff; or just reading the fine print? </p>

<p>The point I want to make is this was not a surprise; one side mentioned the issue and got quashed; not the other side wants to act like a drunk that does not remember it.<br>

Stuff like this will happen again and again if folks are so in love with the elected folks.</p>

<p>Now we have to live with the "lets go for it" behavior</p>

 

<blockquote>

<p>This is what folks wanted and voted for; ie change.</p>

 

</blockquote>

<p>WOW! & relax folks.</p>

<p>There is a cure and it is coming in (2) installments.</p>

<p>1) The general election less than 90 days away; which will create a "Lame Duck"<br>

2) 14 months from now (HE'LL) be too busy figuring out how to get re-elected that he no longer poses a threat to anyone in the country.</p>

<p>Sadly; undoing much of the damage already caused will take some time.</p>

<p>Remember, "The Gov't" is not a separate entity...WE are the government; let's try to remember that when we hit the polls this November.</p>

<p>Kevin I agree with you, minus one issue, its not just him, if he was gone tomorrow the whole party will continue with the same agenda.</p>

<p>Michael to your point without the political aspect. Yes this is a huge problem I wish that my hobby was currently a job but its not, and actually this type of requirement might prevent me from making a business out of photography. Which was my 3 year plan. Do you know if I am not a business owner can I send an email.</p>