Small business owners across the country breathed a collective sigh of relief when the President signed a bill to repeal the new requirement to report on form 1099 all payments to any vendor of $600 or more. This rule was passed in 2010 and would have been effective this year. It would have created a burdensome reporting obligation at significant cost.
Rules for Reporting Payments on Form 1099
With all the commentary about the now repealed law, it might be a good time to be reminded about the existing rules for reporting payments on form 1099. Basically, all reportable payments in a calendar year accumulating to $600 or more are reported on form 1099 except payments to certain corporations. Reportable payments generally include forms of compensation to independent contractors, interest, rents, royalties, attorneys’ fees. And, if you file 250 or more 1099s, they must be done electronically.
While your reporting obligation is the same as last year, it also might be a good time to review your processes or maintain vendor files. For example, a little spring-cleaning by eliminating duplicates and vendors that are no longer working for you would increase efficiency. It would also be a good idea to obtain updated W-9’s if you haven’t already done it. Finally, make sure that your documentation of exempt vendors is up to date.
As always, if you have questions please call your BKM Sowan Horan tax professionals.