A new year and new tax laws always go into effect. Normally they are minor and of little consequence, but a big one hits in 2011 and continues to effect us in 2012. That is the reporting requirements for businesses paying over $600 to a single company. The Small Business Jobs Act effects us in 2011 and the Health Care Act kicks in in 2012.
Starting January 1, 2011, individuals that have a rental property are now considered a business. They will be required to total expenses paid for the property and issue a 1099 in January 2012 to non-corporate suppliers that provided services that total over $600. This would include gardeners, maintenance personnel, and repair companies. 1099's must be filed by January 31st to avoid penalties.
Beginning January 1, 2012, the Health Care Act expands who you will need to report. Payments to corporations will be included as reportable transactions. Additionally, in addition to services, purchases of goods and tangible property will be included as reportable transactions. Therefore, payments made by a business or rental owner to Home Depot in excess of $600 will require filing a 1099 to Home Depot.
The Jobs act also increased the penalties for not filing a 1099 or filing late. Currently, the penalty for late filing is equal to the penalty for not filing; $75 per 1099. Beginning in 2011, the penalty for late filing is: $30 if filed by March 1st; $60 if filed by August 1st, and; $100 if filed after August 1st. The penalty for "intentionally" not filing is the greater of $250 or 10% of the amount that should have been reported.
Congress has now put some teeth into the penalties for not filing 1099's while increasing the reporting requirements. The American Institute of CPA's has asked the Senate to review the reporting requirements as unnecessary and excessive. Three different sub-committees have looked at the rules and indicated that they are OK with the requirements. So it doesn't look like they will be changed until after the first flurry of useless 1099's are received in 2013.
As always, please call (949-683-8111) or email us at info@southcountycpa.com if you have any questions. We are here to help.
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