As a result of a new law signed this year, beginning with payments made in 2012, every business will be required to issue to any vendor of services OR property to which the business has paid more than $600 a year for those services or property, an information reporting form known as Form 1099. The Form 1099 must also be sent to the Internal Revenue Service. In addition to issuing the forms, a business will have to get Taxpayer Identification Numbers (TINs) from all of those vendors and withhold payments to any such vendor until it receives the TIN. Penalties apply if you fail to issue the Forms 1099.
Under the existing law, businesses issue the Form 1099 only to individuals who provide services to a business. The new law makes two changes: the Form 1099 must be issued to corporations of all sizes and shapes as well as to individuals AND a Form 1099 must also be issued to individuals and corporations that provide property to a business.
The payments that are included under this law are, not only those made directly by check, but also those made by other means such as credit cards, for example. Think about the airlines, hotels, rental cars, and restaurants that appear on your credit card bill. You might not think of them as vendors of goods and services, but that is what they are. Also, if you are in the business of selling or distributing goods, all of your suppliers of products are also vendors under the new law. (Under existing law there are regulations that provide narrow exceptions for some types of vendors (telegrams, telephone, freight, storage) and some individual vendors that accept payment from you by credit card and meet qualifications set forth by the IRS. Even if some regulatory exceptions are carried over under the new law, you will still be the one responsible and liable for issuing the information report and it will not be easy.) And, of course, any business that pays you more than $600 will be sending you a Form 1099.
Senator Mike Johanns (R-NE) has introduced S.3578 – Small Business Paperwork Mandate Elimination Act and Representative Daniel Lungren (R-CA) has introduced H.R. 5141, The Small Business Paperwork Mandate Elimination Act. Both bills would repeal the provision.
The message is simple. Tell your Senators and Representative to repeal this new requirement before it is implemented. Click here to find your Representative by zip code and to send an email. Click here to send an email to your Senators. When you send email, identify yourself as a constituent in the header. For example: “Repeal Form 1099 Constituent from ZIP CODE XXXXX.”
“You can create your own message or copy and paste the following:
Please repeal the new Form 1099 requirement found in Section 9006 of Public Law 111-148. It requires me to issue a tax information reporting form to virtually all of my vendors. This is a significant direct increase in the paperwork burden on me. Further, it is not simply a matter of completing the form, but also the work and time involved in obtaining the proper tax identification number and dealing with backup withholding requirements. While I am told the goal is to get businesses to report all of their income, if I do not issue these forms correctly, the penalties will not fall on those businesses that might have been under-reporting income but on me, even though I am running my business in a proper way!”
Please let your representatives know that small business needs this 1099 legislation repealed if we are to see an improved business climate.
CPSC Proposed Interpretative Rule:
Definition of Children’s Product
The Office of the General Counsel of the U.S.Consumer Product Safety Commission (CPSC) last week provided a notice to the Commission on a proposed interpretive rule designed to provide guidance on the factors that must be considered when evaluating what is a children’s product.
The Consumer Product Safety Act of 2008 was voted into law on August 14, 2008. Prompted by highly-publicized recalls of imported toys, the Act substantially amends the Consumer Product Safety Act and enhances the authority of the U.S. Consumer Product Safety Commission. The new Act, which is over 60 pages long, covers a broad range of topics, and primarily focuses upon the components, testing and labeling of children’s products and toys, particularly with respect to lead and phthalates. As such, the new Act is likely to impact products manufactured and distributed by HMA members.
HMA has been working diligently with our members to communicate this information. Contact your local Congressman now to express your issues with the Act and the possible areas for repeal or revision. Click here to contact your local Representative.