Are any of you (with experience running a small business) concerned about the negative impact that the new paperwork regulations the IRS is about to impose on sole proprietors and small business people?
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 an absolute avalanche of new paperwork! An estimated 40 million taxpayers will be subject to the requirement, including 26 million who run sole proprietorships
The expanded reporting requirements, which Congress slipped into the landmark health care reform bill passed in March, are an attempt to create a paper trail of 1099s exposing business-to-business payments that might otherwise stay off the radar.
But the cost of that paper trail could swamp the small companies, sole proprietors freelancers forced to generate it. Pennsylvania business networking organization SMC Business Councils surveyed its members and found that they currently average 10 filings a year of 1099 forms. The new rules would push that average to more than 200 filings per year for a typical small business.
Anyone think all this paperwork is a bad idea when small businesses are already struggling?
It may be a lot of additional work only if done by hand. For any company using an accounting software, it will actually be easier. How?
Well, the vendors will be already in the Vendors List. Before, you'd have to filter this list to find out the ones you paid $600+ before issuing them 1099s. Now, you can just press 'All' and skip the filtering step altogether, so it's simpler than before.
Add a bunch of dead trees, and you are done!
You realize this new law is not about typical 1099 workers such as you mentioned... It's about a small business person being required to issue 1099s to any entity (corporate or person) that the business pays (i.e. landlord, telephone, web hosting, office supplies, etc will all require you to issue 1099s) - the list of business-to-business services seems almost endless. A typical business highlighted in the article that might issue 10 forms will have to issue 200+. That's a lot of paperwork for people that don't have the time and skill set you have for completing government paperwork.
BizResearcher | Window Shopper |
7/13/2010 - 8:47 am
I own a small LLC. I have received and issued 1099s for business-to-business services and goods and independent contracting for years. I don't see that this regulation changes anything if businesses have been complying in the past. For many years, 1099s have been required for any transaction of $600 or more.
To cover myself and to help with tax preparation, if I pay an independent contractor less than $600 in a year, I send them a year-end statement for their tax records. It includes the dates they worked and the amount paid to them. That way, they have a record for their taxes, and if they choose not to report the income, they can't say they didn't know. I keep a copy in my files should the IRS have any questions.
If a business has been careful to follow the various tax reporting requirements, this regulation should valid what they have been doing rather than adding an extra burden.
rogerm | Performer | 9/23/2010 - 2:00 pm
CrestCapital | Creator | 7/13/2010 - 9:02 am
BizResearcher | Window Shopper | 7/13/2010 - 8:47 am
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