It is official! President Obama signed the 1099 repeal on April 14th. The health care reform law that was passed some time ago had a buried mandate requiring all businesses to begin doing 1099-MISC forms for ANYONE making over $600. You might say that they were doing this already. Unfortunately you would be wrong. Previously, there was an exemption for corporations that you paid. Small businesses did have to file Form 1099-MISC for any contract labor by a person or proprietorship who you paid to do work, but corporations were exempt.
For example, the health care reform law was going to make it so Joe the Plumber would have to 1099-MISC Home Depot if he bought over $600 worth of materials. Also, this would mean my tax business would have to 1099 a software company who provides my tax software if I spent over $600 with them. As another example, my sister’s faux company would have to 1099 Sherwin-Williams if she purchased over $600 of paint from them. Talk about a compliance nightmare. This was going to be a pretty large burden on small businesses, and I am glad it was repealed.
However, the win on 1099 repeal is short lived because another development has started in this same arena. Senators have introduced a bill to mandate employers e-file W-2 forms for their employees. Currently, only employers with >250 employees have to e-file the forms. Everyone else is simply encourage to e-file the forms due to the government’s low cost to process these compared to paper forms. I have mixed feelings about this. One, I think it is great that it would save us taxpayers money because the government would be more efficient. Two, it is pretty easy to e-file W-2 forms thanks to vendors like Wage Filing and Track1099. However, I do see it being a problem for very small companies with 1-20 employees who may not want to e-file them. Unfortunately, the senators’ proposal only provides an exemption for small businesses with 5 employees or less. I will keep you