How the new Health Care Reform Act effects 1099 filing requirements
On March 23, 2010 the Patient Protection and Affordable Care Act was signed in to law. A PDF of the final bill passed by both the House and Senate is below:
Patient Protection and Affordable Care Act (in PDF)
This legislation significantly impacts regulatory requirements for virtually every organization that issues 1099 information returns.
Section 9006, which is appended below, changes the definition of the word “person” to include “any corporation that is not an organization exempt from tax under section 501(a)”:
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) IN GENERAL.—Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:
(h) APPLICATION TO CORPORATIONS.—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation that is not an organization exempt from tax under section 501(a).
‘‘(i) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.’’.
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.—
Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended—
(1) by inserting ‘‘amounts in consideration for property,’’ after ‘‘wages,’’,
(2) by inserting ‘‘gross proceeds,’’ after ‘‘emoluments, or other’’, and
(3) by inserting ‘‘gross proceeds,’’ after ‘‘setting forth the amount of such’’.
(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after December 31, 2011.
The original Subsection (a) of section 6041 of the Internal Revenue Code reads:
Sec. 6041. Information at source
(a) Payments of $600 or more
All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the case of such payments made by
the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as
may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.
Inserting ‘‘amounts in consideration for property,’’ after ‘‘wages,’’ and performing (2) and (3), the new revised Internal Revenue Code becomes:
Sec. 6041. Information at source
(a) Payments of $600 or more
All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds, fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1),6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gross proceeds, gains, profits, and income, and the name and address of the recipient of such payment.
by 
Erich J. Ruth
Erich J. Ruth provides technical support for National Software which is the parent company for 1099FIRE. 1099FIRE develops and markets a comprehensive range of products that enables any size of business or institution to effectively manage and comply with year-end filing requirements. 1099FIRE is an employee-owned company located in Phoenix, Arizona.
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Does this new law mean as I understand it, that if I purchase a computer for over $600 from Walmart, I have to give them MY SOCIAL SECURITY NUMBER!!!! THEN ANY EMPLOYEE HAS ACCESS TO MY PERSONAL NUMBER!!! Are you people crazy! We have enough problems with idendity theft now I have to worry about making a purchase like a for furniture or computers or a television or at HOME DEPOT! according to my accountant that is exactly what it means and there is no way around it unless I purchase and item less than $600 or stay away from that store and keep my purchases below $600 for the year!! This is Crazy! This will not just effect small business, but all business across the country! Also how are you going to deal with someone from anouther country, say an illeagel alien? Or someone visiting from Canada or Germany?
Starting in 2012, all business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you’re making the payment to — even if it’s a giant retailer like Staples or Best Buy or Walmart — at the time of the transaction, or else facing IRS penalties. To clarify, that’s you the customer, the person who purchased the computer from Walmart, who must attain the EIN number of Walmart so that you can know who to send your 1099-MISC to.
In essence, the 1099-Misc is having its role changed from a form for tracking off-payroll employment to one that must accompany virtually any sizeable business transaction.
One exemption is the use of a credit card. If you go to Walmart to purchase a $600 computer and you purchase the computer with your credit card, then you don’t have to issue a 1099. If you purchase with cash, then you do.
I work at a bead store. We’re a retail establishment. Most of our customers are hobby jewelry makers; they aren’t businesses themselves. They usually buy a few dollars at a time during the year. Eventually, some of them spend $600 during the year.
If I understand the above correctly, then any customer who buys more than $600 (cash) in beads and findings and stringing and such during the calendar year must ask us, the store, for our EIN. They then need to send us a 1099-MISC at the end of the year. But, if they buy their products by credit card, they don’t.
Is that correct? Or have I missed something here?
Also, does that apply to my buying groceries and gas for myself during the year? I know I spend more than $600 in the year on food and gas. How about books at the bookstores? What about clothes or electricity or my personal rent? Does this 1099-MISC affect all of that, too?
Yes. That is what the new law is stating.
The new regulations, which kick in at the start of 2012, require any taxpayer with business income to issue 1099 forms to all vendors from whom they purchased more than $600 of goods and services that year. That promises to launch a fusillade of new paperwork: An estimated 40 million taxpayers will be subject to the requirement, including 26 million who run sole proprietorships, according to a report released by National Taxpayer Advocate Nina Olson.
It applies to you as well as the people you vend to. The IRS plans to exempt transactions made through credit and debit cards.
This is for people or companies who “sell things to the stores” like their products they sale.. This is not something that would be send to their customers.
Ok, so does a real estate managment company have to issue a 1099 with their EIN? The managnemt company does not profit from the rental. The income is passed to the owner. Who’s EIN should go on the vendor’s (plumer, gardner, etc.) 1099?