After much debate and cost to the American public, the expanded Form 1099 law that was enacted in conjunction with the 2010 Small Business Jobs Act and the 2010 Patient Protection and Affordable Care Act was finally repealed by the President on April 14, 2011. What does this mean? It means that the requirements for Form 1099 reporting remain unchanged and for the most part (there are exceptions), the same rules as before apply. The increased penalties for failure to file Form 1099, however, remained.
Background
When congress passed the Health Care Reform Act and the Small Business Jobs Act in 2010, both bills contained criteria that required, in short, a massive upheaval in the filing requirements for 1099’s – all earmarked as revenue generators to help pay for both of the bills. These requirements were supposed to improve tax compliance and help pay for healthcare reform. Small businesses and those that are self-employed complained strongly that these requirements would overwhelm them in paperwork and as some have said, put the final nail in the coffin for the small business owner.
The Patient Protection and Affordable Care Act (aka – Healthcare Reform) had overturned the exemption of reporting payments to corporations. Also included in the bill was the requirement that not only were payments of $600 or more for services required but now we would all have to prepare 1099s for those that we bought more than $600 of goods (this included items like office supplies, computer supplies, etc.).
The Small Business Jobs Act extended the reporting of rental income to include all service providers – in other words, individuals would have to report payments of $600 or more to landlords just like businesses currently do.
Many trade associations, including the American Institute of Certified Public Accountants (AICPA) and lobbying groups had pushed strongly for repeal of law.
Conclusion
While there are different views on how much revenue would be generated from this requirement, estimates suggest that that at least $19 billion was projected to come from these bills. To cover this lost revenue, the President’s repeal included provisions that would limit and/or delay the highly touted health insurance tax credits.
