For biz geeks – Starting in 2010 any taxpayer with business income will need to issue 1099 forms to all vendors from whom they purchased more than $600 of goods and services that year unless they use a credit or debit card for the purchases… Greg writes –
Meanwhile, the IRS will have its hands more than full trying to administer everything else this law requires, according to the Washington Post. Some of this is just beginning to sink in to the minds of the public. In 2012, every business, including sole-proprietorships, will have to issue a 1099 to anyone from whom it buys $600 worth of goods or services. The IRS’s Tax Advocate Service says, “For example, if a self-employed individual makes numerous small purchases from an office supply store during 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.”
When I try to explain this to business groups, they invariably reply, “No, that can’t possibly be right. You mean if I buy $600 worth of paper from Wal-Mart in the course of a year I have to get their IRS number, the address of the corporate accounting office, send them a 1099 and another copy to the IRS?” Yep. That’s exactly what it means…
I don’t know, but the Tax Advocate Service estimates 40 million businesses will be affected. And no money was appropriated to cover the cost. CNN Money reports that purchases made with debit and credit cards will not be subject to this new rule, because “a separate reporting requirement kicks in next year that will cover card transactions and help the IRS spot unreported payments made through those channels.” The article quotes Tom Henschke, president of SMC Business Councils, as estimating only 10 percent of all transactions will be exempted. He says, “Most of the small businesses out there that do small business [purchasing] don’t do it by credit card. One of the reasons is the transaction cost is very high – 2% to 3%.”
It’s unclear there are enough human or computer cycles to do anything with all the 1099 information that will flood the IRS too. This will be interesting to watch, we don’t think the expanded 1099 reporting is going to end up happening the way it was first outlined once more people and businesses become aware of it.
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coo-coo ca joo! Our government is stupid! More paper! More BS!
We’re not paying our fair share dammit!
Once again the bureaucrats have figured out another layer of BS to fux up the worx.
It’d be nice if we started electing people that *have* lived in the real world and worked at running a successful smallish business.
these folks come from another planet.
The most interesting thing about all of this to me is that this is all part of the massive health care law. Whether you like the ideas in the bill or not, it is tough to argue that the law does not overstep its bounds in many areas that have nothing to do with health care.
I heard of this one from a friend and had the same response in the article, “No, that can’t possibly be right.”. Not that I should trust the internet at large more than word of mouth, but now that I’ve heard it from multiple sources I’m starting to get worried.
I have done a fair deal of purchasing from smallish suppliers and it’s about 50/50 chance that they will even accept CC payment, and larger ones will encourage payment via check with reduced rates (~%1 or split the difference) or better terms (net 30 if you pay with cashy monyies). So I don’t expect plastic to save you from this hassle.
Also, WTF, how can the paperwork possibly be worth the trouble? Dont businesses pay taxes on their income anyway?
-confused and afraid
It does seem excessive, un-American, but I suppose net-net it will just be a boon to the credit card companies.
(Radfahrer, it’s probably a good time for those businesses of which you speak to get their credit card system in place.)
Radfaher: It’s not about the tax…directly. It’s about collecting information on all economic activity. Notice the exemption for credit/debit card transactions, because they already have that data. You won’t get away with transactions for cash. Or for gold…another part of the new law says gold transactions have to do on a 1099 also. http://tinyurl.com/32weetk
This is about making sure that the Obama administration can have the IRS find everyone who might be considered to be “a business” to monitor that everyone is paying the new “health-care-reform” taxes (yes, they admit they are taxes now, after denying it before the bill was slam-dunked). And it’s no accident that Obama took over student loans, either…all *that* data will go to IRS as well.
It’s all about redistributing wealth, and calling it “social justice”. Was this the “change” you all were “hoping” for?
At least for buying stuff online, this should be easy: all the vendor needs to do is put a downloadable copy of their W4 on their site. I know I’ve seen it done already, just can’t remember where. It was part of the ordering process – there was a link to download the W4 right on the purchase screen.
The odd thing is that some who oppose Obama also want a VAT tax. Note that this is essentially the same level of reporting quired for a VAT.
(I’ve always opposed a VAT, and dislike this new requirement. On the other hand, I remember the carpet cleaner and the tree trimmer who told me the joys of a cash business, and showing no income. I thought at the time, “sucks to be me, and pay their taxes.”)
The rule of a thumb – government will always increase its presence. Not in 2012 then in 2014. This is how bureaucracy works.
I’m from country where in last 30 years we have doubled or tripled number of clerks, despite most of us believe we have lived in socialism 30 years ago and now we are living in ‘capitalism’.
Anyway – how it will work? IRS will be overwhelmed by amount of paperwork. There will be gap between projected income and spendings in health-care. So what will do true bureaucrat? In next year IRS budget will be doubled, there will be more clerks, and they try to manage that paper. Mostly requiring new reports. Or lowering $600 into $500. We need to find additional revenues! I have seen that so many times here in Poland.
Of course so much information can’t be processed. So some people will try to foul that system, will skip 1099 and will go unnoticed. Some just won’t be aware they have crossed $600 border and will be punished.
That is so un-American how smbd have written.
Pardon my English but it is just plain sad and I had to write that.
Government does not solve any problem, just make itself bigger and bigger.
How it was said? Socialism is a system which fights very hard with problems caused by socialism itself.