Shop Talk: Practical answers for tough business questions
Question: In a recent Shop Talk, you answered a question about a requirement in the new health care law that gave store owners the obligation of creating 1099s for vendors and reporting this information to the IRS at year end. I have read that the bill was overturned, so now I’m a bit confused. Do we have to do this or not?
Answer: On April 14, a bill was signed into law that reverts the 1099 reporting requirements back to the original rules in place before the passage of the Obama health care law. Therefore, you will not need to issue 1099s to all vendors for payments made during 2012 and thereafter. You will only need to issue 1099s to unincorporated vendors whom you pay $600 or more in a calendar year.
The lost tax revenue resulting from the repeal of the new reporting standards is estimated at $21.9 billion. Given the large amount of tax revenue at stake, it is possible the rules may change again in the future to include corporations. My accountant recommends that we proceed with gathering Forms W-9 from our vendors (other than publicly traded companies), but I have not yet initiated this. My personal plan is to wait until the end of summer, gauge the political climate, and then decide what to do. If politicians were to reverse this, and they wait much longer than that to reinstate this policy, they also will have to bump the effective date.
First published in Vol. 26 No. 6 of Retailing Insight. © 2011 Continuity Publishing Inc. All rights reserved.