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View Full Version : Are supposed to issue a 1099 to clients who pay more than 600 per year?



CrossCountry
07-30-2012, 10:39 PM
I sort of remember last year there was a buzz about having to provide some type of form to clients that pay more than 600 for a service. I never followed through with research, but now we have a client that has dramatically surpassed this amount.

Do we have to issue any type of form?

What happen to that proposed regulation?

Thank you,

vangogh
07-30-2012, 11:59 PM
It's not anything new. As long as I can remember you always have to fill out a 1099 for anyone you hire on contract and pay more than $600 over the full year. As someone who does contract work for others I can tell you most people never fill out the form, since only a few ever send them to me. They're supposed to help the IRS keep track of things I think, though when you file electronically they never get sent in so I'm not sure if they serve a purpose or if they have another purpose.

CrossCountry
07-31-2012, 12:36 AM
vangogh, I don't mean when I pay to a contractor. I remember back in 2010 there was all this buzz about having to report purchases over $600.

Since I don't remember much, I search online and found this piece of news that mentioned the specific reporting I am referring to:

"Under the law, businesses will be required to report purchases of items like office equipment, food and bottled water, gasoline, lumber and plumbing supplies if payments to any vendor in the course of a year total at least $600. They will, in many cases, also have to report payments for things like travel and telephone and Internet service."

http://www.nytimes.com/2010/09/12/health/policy/12health.html

Although this news is health related, it mentions the specifics of the reporting I am referring to.

Do you know what happened to this?

Thank you

vangogh
07-31-2012, 01:28 AM
My bad. I misread your original post. It kind of sounds like the same thing I was referring to though. From the article


To improve compliance, the law requires businesses to file a 1099 tax form identifying anyone to whom they pay $600 or more for goods or merchandise in a year. Businesses will also have to send copies of the form to their vendors, suppliers and contractors.

If I'm reading the article right it kind of sounds like an expansion of what I was talking about above. I hadn't heard about it at the time so don't know if it was ever repealed. I'm guessing it wasn't and it's still in the health care law, but really don't know.

Business Attorney
07-31-2012, 09:46 AM
Vangogh is right. Although you are calling your transaction with your customers a "purchase," it is really a SALE by your business. The article you read is referring to your purchases, not your sales.

In any event, the law did not change. The proposal was to apply the current law to all payments over $600, including payments made to corporations, which are currently excluded from the reporting requirements. That would have meant that not only would you have to report payments to individuals, partnerships and LLCs but you would have had to report payments to Dell for your computers, to Staples for your office supplies, etc...

For now, anyway, the law is still the same as it has been.

vangogh
07-31-2012, 12:03 PM
Thanks David. It sounded like it was the same thing, but I wasn't sure. It just seemed to work the same way and the $600 seemed too coincidental not be the same.

jamesray50
08-01-2012, 01:16 PM
" Are supposed to issue a 1099 to clients who pay more than 600 per year? "

A client is someone who pays you for your goods or services, you don't have to issue them anything. The law you are referring to is for a vendor, someone you pay for goods or services. If you have paid over $600 for services, by check or cash, and they are not a corporation, then you will have to issue them a 1099. You should send them a W9 to fill out so that you will have the information you need to complete the 1099. If you paid them by credit card or other electronic means, you do not have to send them anything, the merchant service provider is responsible for sending the forms.

Evan
08-03-2012, 08:12 PM
The law had been changed to extend the requirement to issue 1099s to everyone, but due to the extreme burden it would have caused, the "same rules" that have applied for many years are still kicking.

vangogh
08-06-2012, 01:16 PM
Yeah, that would have been a little difficult. The $600 minimum makes more sense.

CrossCountry
08-09-2012, 08:05 PM
Thank you Evan. This is the answer I was looking for. But do you guys see how this law would have caused confusion. Already here we have been back and forth about it

:)

Thank you

vangogh
08-12-2012, 12:21 PM
But do you guys see how this law would have caused confusion.

Where the IRS is concerned, most everything can be confusing. :)