Independent Contractor Compliance Blog - by Collabrus™

WASHINGTON DC-The Internal Revenue Service invited public comment on how to carry out “The Patient Protection and Affordable Care Act of 2010,” also known as the Heath Care Bill, that requires all corporations to receive a Form 1099 for their goods and services to other businesses.

What does Health Care have to do with 1009 reporting?

A lot since Congress quietly slipped in the requirement during the confusion surrounding the health care bill. The IRS had been asking Congress for years to require that corporations receive a Form 1099 for their goods and services to other businesses, just like sole proprietors and partnerships. The IRS got its wish and the requirement takes effect for all payments made after December 31, 2011.

The IRS believes one of the major sources of the $350 billion Tax Gap each year is underreporting of income by small businesses that do not receive a Form 1099.

The IRS argues that third party reporting of payments to small corporations will put these payments on the Tax Radar and significantly increase reporting of income (and generate more revenue).

Now the IRS is asking for input on how to implement the new law

The IRS is asking taxpayers, especially businesses, to provide input on how this new requirement may be efficiently implemented to, “…help the IRS issue guidance that implements this provision in a manner that minimizes burden and avoids duplicate reporting.”

The notice cites an example of how the IRS has already found one instance to prevent duplication by piggy-backing on another IRS requirement:

“…Under a proposed regulation, many business purchases made with credit or debit cards would be exempt from the new reporting requirement because they are already reported by banks and other payment processors…”

To me corporate 1099 reporting is clear since it basically puts corporations in the same category as individuals for 1099 reporting.

So I had to ask myself, “Why the input? Is the IRS trying to build “buy-in” on a potentially controversial law change by giving the impression businesses have some control over how it is implemented?”

I don’t know the answer to that question, but it will be interesting to see to what extent input is actually considered. In either case, it is clear the IRS is actively implementing this new requirement.

The IRS and state tax agencies are serious about IC Compliance-you should be too.

• Both federal and state enforcement agencies constantly lobby their legislatures for new laws to obtain stronger tools to make their job easier.
• They spend billions each year to collect every possible dollar from taxpayers.
• They employ accountants, CPAs, IT experts, criminal investigators, attorneys and others to close loopholes and to identify and prosecute violators.

Tax agencies utilize full-time experts focused only on one task-compliance. Shouldn’t you have the same for your business?