EXPANDED FORM 1099 INFORMATION REPORTING HAS BEEN REPEALED

After months of haggling, both houses of Congress put aside their differences and repealed the requirements that landlords and businesses report to the IRS all payments over $600. The rental property expense reporting requirement had taken effect January 1, 2011, but has been repealed as if it never existed. The reporting requirement for businesses had been set to go into effect in 2012.

Both reporting provisions were criticized for the huge burden they would have put on taxpayers with rental property and small businesses. Even though both the House and the Senate, Democrats and Republicans alike, agreed that the reporting provisions had to go, Congress spent two years debating how to make up the tax revenue lost by repeal. They finally agreed on a revenue raiser that requires people to return overpayments of health care subsidies if their incomes exceed 400 percent of the poverty level. Although the President was not in favor of this offset, he finally accepted it and signed the repeal bill.

As your tax professional, I cannot stress enough how important it is that the expanded information reporting provisions were repealed. These requirements would have cost you enormous time and energy to track every business payment made for such things as office supplies at Staples to rental payments for a lease. You would have had to get the Taxpayer Identification Numbers for every person and business you paid. You would have been required to calculate the total payments made to each person, each business or each store, unless you paid by credit card, file 1099 forms with the IRS for each vendor that received more than $600 per year. Had you failed to do so, you would have been subjected to significant penalties.

We are all grateful that common sense prevailed and Congress was able to come together for the public good and abolish these ill-conceived tax provisions before they took effect.

(June 7, 2011)

[Back]