As this new healthcare legislation kicks into action, we are finding out more and more about what’s actually in it. In order to pay for this massively expense bill, Section 9006 makes some important changes to the current 1099 requirements.
What is a 1099?
1099′s are forms that take the place of W-2′s for independent contractors and individuals who perform services for businesses; and are not corporations or LLC’s taxed as corporations. For example, I received 1099′s from my clients at the end of last year for accounting services I performed for them.
What are the current rules?
Currently, every business is required to send a 1099 to any individual or business owner who is not a corporation (or an LLC taxed as a corporation), and performs more than $600 worth of SERVICES (not products) during the tax year for that business.
Usually, you’ll see 1099′s going to independent contractors on construction projects, accountants, bookkeepers, cleaning people, etc.
1099′s are also required for your Landlord if you rent office space, and any attorney fees you pay during the year.
Healthcare Legislation changes the rules
In the current legislation, Section 9006 of the healthcare bill requires the following beginning January 1, 2012:
- ALL businesses will have to file 1099s to ALL service providers
- Also, 1099′s will have to be filed for ALL product sales
- It won’t matter whether the service or product provider is a corporation or not
- The $600 threshold still stands
What does this mean?
This means that, as a business owner, for EVERYONE you pay money to for ANY reason:
- You have to keep their tax identification number on file (so get the number AS SOON as you start doing business with them) and keep records for each individual vendor to see if the cross the $600 threshold during the year
- You will have to be sending 1099′s to places like AT&T for the phone services, Walmart and Target for supplies, Office Max for equipment, your webhosting company, graphics design person, business coaches, computer software companies, utility company, etc……..
To me, this means A LOT more paperwork for me and my clients.
QuickBooks can help…
QuickBooks can help with this mess…so it’s more important than ever to get your bookkeeping setup properly! I will be discussing 1099′s in QuickBooks as part of my FREE webinar coming on Wednesday, August 25 from 4:00-5:30 pm EST. Click here for more information and the signup.
We’ll have to wait and see what happens after the IRS issues its regulations on the new law, and the public hearings are held; but it’s NEVER too late to get the proper bookkeeping system in place to be prepared! Contact me today if you’d like help with keeping track of your 1099 vendors.
Tags: Bookkeeping, quickbooks blog, Quickbooks help, Recordkeeping, Webinar
