1099 Requirements for B2B Transactions

I've got a bone to pick with our congressmen and congresswomen! You know how legislators sneak unrelated provisions into major bills? Yeah, well, they did it again. Section 9006 of the massive Patient Protection and Affordable Health Care Act will mean yet another huge paperwork burden for small business. It has to do with issuing 1099 forms; it has nothing to do with health care.

Beginning in 2012, all businesses will be required to prepare 1099s for all services and goods purchased from all vendors in excess of $600. Current law dictates that only services provided in excess of $600 must be reported via form 1099 and that corporations (with the exception of attorneys) are exempt from receiving 1099s.

Beginning in 2012, corporations will no longer be exempt, and purchases of goods must also be included. The passing of this legislation is an attempt by the government to close the $300 billion tax gap, which will help pay for health-care reform. So I guess it indirectly relates to the Patient Protection and Affordable Health Care Act in which it was included.

Depending on the industry, many businesses must collect, report and pay over a variety of excise taxes, as well. How much does all that cost your business in bookkeeping and payroll preparation fees? Now business owners must report all business-to-business transactions. So purchases your business makes from Staples, Office Depot and other vendors are included as reportable transactions. You must obtain every vendor's federal ID, track your purchases and prepare the form. This will involve many additional hours of bookkeeping time. It will be mandatory to get an accounting software upgrade because there will be a new form and new preferences to set within the software to track these numbers. It's great for all of the bean counters who can double, triple and maybe even quadruple their 1099 preparation fees. But at what cost to the small-business owner who is attempting to recover from this recession and keep her business going?

Speaking of 1099 reporting, the situation gets worse. Beginning in 2011, all credit card processing companies must report annual credit card transactions in excess of $20,000 and 200 transactions submitted to them for processing by any business on a new IRS form 1099-K.

I thought there would be overlap, but just as I fretted about this possibility, the IRS came up with a solution. So pay attention! If you pay for purchases with a credit or debit card, you are not required to issue a 1099. The credit card companies will do so. No overlap after all. You are only required to issue 1099s for payments made via check or cash. So I won't have to ask Office Depot for its federal ID after all. Because the format of form 1099 will change, we will all have to purchase the upgraded version of QuickBooks or whatever software is used for accounting and 1099 preparation.
It's still going to be a massive amount of paperwork.

Ref: http://www.entrepreneur.com/article/207404#ixzz2g9m3cAXU