Health Care Reform Law Hides Massive Change in 1099 Reporting

A few lines buried in the 2,409-page Patient Protection and Affordable Care Act of 2010 (the new health care reform law) will require U.S. companies to issue 1099s to every business where they spend $600 or more, not just individual contract workers. Starting in tax year 2012, the law expands 1099 coverage to tangible goods and services, thereby also expanding not only reporting but data collection for every payee and vendor with which companies do business throughout the year.

For example, under the new rules, a freelancer who buys a new computer from the local Apple Store will have to send Apple a 1099. A company that buys raw materials used in its manufacturing will have to track those purchases throughout the year and send all of its suppliers a 1099 by Jan. 31 that tallies the total spent.

The year 2012 seems like a long way off, but because the new 1099 rules pose such a procedural burden, it’s a good idea to start thinking through the issues involved.

Businesses will need to figure out how they are going to track all this and compile it at the end of the year so they can file 1099s in a timely way. Also, businesses will need to track 1099s as they come in, to make sure they get to the right person and onto the tax return.

Please contact a RINA representative if you have any questions.