Recently added 1099 reporting requirements repealed

COLLEGE STATION – Congress has repealed the recent legislation that would have expanded the reporting requirements for small businesses and landlords for expenses totaling more than $600, according to a Texas AgriLife Extension Service economist.

The requirements, which were repealed April 5, 2011, had been enacted by the Patient Protection and Affordable Health Care Act and the Small Business Jobs Act of 2010. Taxpayers engaged in a trade or business would have been required to furnish information returns to every payee to whom they made payments for rent, services, products or interest totaling $600 or more during the tax year.

Also facing new reporting requirements were landlords (rental income recipients) making annual payments of $600 or more to a service provider.

Agricultural economists are advising producers to be aware that the reporting requirements in place prior to the 2010 legislation will continue. The same applies for small business owners.

“Taxpayers engaged in a trade or business are still required to provide a Form 1099 to every individual payee to whom they made payments for rent, services or interest totaling $600 or more in any taxable year,” said Jose Pena, AgriLife Extension economist in Uvalde.

For example, this applies to ranchers who lease land for grazing rights or for farmers who rent land for crop production totaling more than $600 per payee during the tax year.

“Payments to corporations are exempt,” Pena said.

The repeal does not affect the 2010 income tax reporting requirement since it “prevents an additional requirement that had not yet become effective, but would have created a lot of additional reporting requirements,” Pena said.

For example, a business would have to furnish a Form 1099 to a vendor from whom $600 or more of office supplies were purchased during the tax year.

“The idea behind the original expanded reporting requirements was to increase tax revenues by assuring that all sources of income were being reported,” said Dr. Gene Nelson, an economist specializing in financial management in the department of agricultural economics at Texas A&M University.  But the additional accounting burden for small business and landlords was not fully considered.

“You will still need to file a Form 1099 as you have in the past,” Nelson said. “It’s just the added reporting burden that had not yet become effective that was repealed. If an IRS audit of your records finds that you did not file the required forms, the result could be substantial penalties.”

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