1099 Rules Change on January 1, 2011

On December 30th, 2010, posted in: E-News by 0 Comment

In January 2011, the rules change significantly. In January 2012 you will need to send a Form 1099 to any vendor, regardless of their business entity, that you pay $600 or more to for services and goods in 2011. This is a major change in reporting that will require most small businesses to send out many more 1099s than they do currently. You’ll need to track not only how much you pay vendors, but the method of payment as well. Credit card and debit card transactions are excluded from the new 1099 rules. Be sure to get completed W9s from your vendors early in the year to make sure that you don’t need to do backup withholding.

New rules apply to individuals, partnerships, and S Corporations with rental properties.

The only 1099 change that impacts the 2010 tax year is the penalty for failing to file correct information return which can be as much as $100 per Form 1099. In cases when a vendor fails to provide an identification number, the rate you’ll use to withhold federal income tax (known as backup withholding) remains at 28%.

This new law is part of the healthcare bill. Attempts to revise it has been tried at least 3 times. If you don’t like this new provision, let your Senator and Congressmen know.

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