by: David Marrison, OSU Extension Educator
Last May, the Ohio Ag Manager shared an article titled, The Impact of Section 9006 of the Patient Protection and Affordable Care Act on Agriculture (May, 2010) discussing the new 1099 reporting requirements in the Health Care Bill. At the time of the article, we promised to update subscribers of the Ohio Ag Manager, if a repeal happened. Thankfully for many agricultural businesses, President Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (H.R. 4) on April 14, 2011. This resolution repeals the expanded 1099 reporting provisions of the Patient Protection and Affordable Care Act (passed in March 2010) and Small Business Jobs Act (passed in September 2010).
In March 2010, the Patient Protection and Affordable Care Act sought to expand the 1099 reporting requirements (beginning in 2012) to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation) and to include payments made for property (was only for services not goods, previously). H.R. 4 signed by the President repeals this 1099 reporting expansion. Under the proposed rules, a 1099 would have to be issued by a farm business to any business or individual who the farm purchases tangible goods. For example, Farmer Jones purchases 25 tons of lime valued at $760 worth from XYZ Lime and Farmer Brown purchases $700 of baler twine from RU-Ready Farm Supply, both would Farmer Jones and Farmer Brown would be required to issue 1099s for these purchases. The new rules would have required the farm to issue 1099s to corporations as well. 1099s would have to been issued for purchases of goods or services from any source. This would have required millions of additional forms to be issued from the farm sector.
The Small Business Jobs Act (passed in September, 2010) enacted a requirement that individuals who receive rental income must issue Forms 1099 to service providers for payments of $600 or more. It required landlords to obtain proper taxpayer identification numbers from service providers such as plumbers, painters, roofers and accountants who were paid over $600. This provision was to apply to any payment made after December 31, 2010. H.R. 4 strikes this requirement in its entirety placing individuals who receive rental income in the same position as if the expanded information reporting requirements had never been enacted.
A reminder on what was not repealed
The expanded reporting requirements from the Patient Protection and Affordable Care Act and the Small Business Act have been repealed, but do not think that it repeals all Forms 1099-MISC. If you are in business, you still must issue a Form 1099 to anyone whom you pay $600 or more for services during the course of the year. Namely, under IRC § 6041(a), “All persons engaged in a trade or business and making payment in the course of such trade or business to another person” of $600 or more must report the amount and the name and address of the recipient to the IRS and to the recipient. The Code applies this requirement to payments of “rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income,” and the Treasury regulations add, “commissions, fees, and other forms of compensation for services rendered aggregating $600 or more” as well as interest (including original issue discount), royalties and pensions (Treas. Reg. § 1.6041-1(a)(1)(i)). This required information must be reported each calendar year for payments made during that calendar year.
H.R. 4 did not repeal the increase in the information reporting penalties that were mandated by the Small Business Jobs Act. The first-tier penalty under IRC § 6721 for failure to timely file an information return was increased from $15 to $30, and the calendar-year maximum from $75,000 to $250,000. The second-tier penalty was increased from $30 to $60, and the calendar-year maximum from $150,000 to $500,000. The third-tier penalty was increased from $50 to $100, and the calendar-year maximum from $250,000 to $1,500,000. For small business filers, the calendar-year maximum increased from $25,000 to $75,000 for the first-tier penalty; from $50,000 to $200,000 for the second-tier penalty; and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard increased from $100 to $250. The increased penalties will be adjusted for inflation every five years. The increased penalty amounts were effective Jan. 1, 2011, and remain in effect after the repeal of the expanded 1099 reporting requirements.
President Signs Repeal of Expanded 1099 Requirements. http://www.journalofaccountancy.com/Web/20114071.htm
Journal of Accountancy: http://www.journalofaccountancy.com/
William Perez, Expanded 1099-MISC Reporting Repealed. April 10, 2011
Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011. http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.4: