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Expanded 1099 Reporting Requirements Repealed

On April 5, the Senate (by a vote of 87-12) approved the "Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011" (The Act). The legislation retroactively repeals expanded Form 1099 information reporting rules added by recent legislation.  It was passed by the House on March 3, by a vote of 314-112. The Act is cleared for the President's expected signature.

Original information reporting rules - Before the Health Care Reform Law and the Small Business Jobs Act of 2010, businesses generally were required to report payments totaling at least $600 in a single calendar year to a single recipient to the IRS. Reporting on Form 1099 was required only when the payer was considered to be engaged in a trade or business and made the payment in connection with that business. The type of payment that most commonly triggered the reporting requirement was for services.  There were a number of exemptions from reporting requirements under prior law, notably including payments to corporations.

Health Care Reform and Small Business Jobs Act Changes - The Health Care Reform Law provided that beginning in 2012, payments for goods or other property were now subject to filing of Form 1099s.  Additionally, the law provided that beginning in 2012, payments to corporations (except not-for-profit corporations), which had been exempt from the reporting requirement, would be subject to information reporting.  The Small Business Jobs Act of 2010 provided that a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property and would be subject to Form 1099 reporting requirements.  Specifically, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide a Form 1099 to the service provider and IRS.

New law - For payments made after Dec. 31, 2011, The Act repeals the expanded reporting requirement for payments to corporations and payments for goods or other property and for payments made after Dec. 31, 2010, The Act also repeals the Form 1099 reporting requirements for recipients of rental income from real estate who are not otherwise considered to be engaged in the business of renting property. 

The information reporting rules for Form 1099s revert to pre-existing law before the Health Care Reform Law and the Small Business Jobs Act of 2010.

HORNE's tax team is ready to assist you.  For more information, please contact your HORNE advisor.