New Form 1099 Filing Requirement Buried in Health Reform Bill

Update: September 14, 2010

Today the Senate today defeated on procedural votes two amendments dealing with Form 1099 reporting:

• Mike Johanns (R-NE) amendment to repeal entirely the rquirement
• Bill Nelson (D-FL) amendment to significantly water down who and what would be subject to Form 1099 reporting.

IRS has pledged to work with small business to lessen the impact of rule. Since requirments do not take effect until 2012, there will be further opportunities for repeal and propose adjustment to regulatory implementation.

August 4, 2010

In enacting the massive health reform bill, Congress needed to raise revenue and so the lawmakers turned to an idea that had been floated for many years…expanded Form 1099 reporting.

Buried in the 2,700-page law is a provision which will require all businesses to prepare and file a Form 1099 for all payments to corporations for goods and services in excess of $600. The new requirement is scheduled to reflect payments made in 2012, with the first IRS submission due in January, 2013.

The Congressional Budget Office has estimated that the expanded reporting will generate some $17 billion in revenue as corporations receiving income will find it harder to avoid reporting it to the IRS.

The new requirement means administrative headaches for musical instrument manufacturers and retailers, who now will have to obtain federal tax identification numbers for all suppliers, vendors and others with whom the industry deals on a regular basis. Current law requires Form 1099 reporting only to individuals who supply services to the filer and who receive more than $600 in compensation annually.

Sens. Mike Johanns (R-NE) and John Barasso (R-WY) have already authored an amendment to repeal the reporting requirement, and the Obama Administration is reportedly considering ways to possibly soften the adverse impact, fearing a public relations backlash.

NAMM’s Washington Office is working with the National Retail Federation, the National Federation of Independent Business and other industry groups to devise a strategy to, preferably, repeal the filing requirement (although additional revenue might have to be found to offset the cost), or mitigate its impact.

NAMM members who have views about the increased paperwork burden the requirement will generate are encouraged to communicate them to their members of Congress.