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New 1099 Reporting Requirements

The 2010 Health Care Act contains new reporting requirements that will greatly expand the number of Forms 1099 that businesses will have to issue.

Under the old rules, businesses generally only had to issue 1099s to individuals who received payment for services in excess of $600 for the year. Under the new rules, effective for all payments made after December 31, 2011, business will have to issue 1099s for all payments totaling $600 or more in a calendar year to a single payee (excluding tax-exempt organizations).

Once in effect, businesses will have to track amounts paid to almost all vendors and issue a 1099 at year-end to those receiving more than $600 for the year. With many small businesses having numerous vendors, this will dramatically increase the paperwork burden.

We suggest business owners and managers commit to the following course over the coming year:

  1. Review your current vendors, determine who must receive a 1099, and implement a procedure that determines if new vendors must receive a 1099

  1. Gather the information necessary (Federal identification number) from existing vendors to enable you to issue a 1099 to them

  1. Explore or tweak your current accounting system to give yourself a simple way of tracking payments made to individual vendors

Complying with these new requirements could be a big job for some small businesses, but with careful planning and consideration, it can be manageable.

Please feel free to call me with any questions.

Jon Majkut, CPA

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