With information from The Tax Foundation, I have put together a timeline of the Health Care Reform bill and when the major provisions of this bill will affect your business.
Two provisions which haven't received much press but which could have a major effect on your business are the elimination of the corporate exclusion for 1099-MISC forms and the requirement that you include health care benefit values on employee W-2s.
Increased Reporting on Form 1099-MISC
Form 1099-MISC is used to report payments made to independent contractors if annual payments are more than $600. Payments to corporations have previously been excluded. so if you paid an attorney who was part of a professional corporation, you did not have to send that corporation a 1099-MISC. A provision on the Health Care Reform bill eliminates the exception. And you will probably have to withhold tax on those payments to contractors, starting in 2012.
- The corporate exception is ending and, with few exceptions, all corporations will need to be reported on Form 1099-Misc for payments made after December 31, 2011.
- New procedures will be required for reportable corporations, property, and gross proceeds based on current legislative action.
- Payments for property (goods) will need to be reported on the 1099-MISC if at or above the familiar $600 annual payment threshold. These changes are effective for all payments made after December 31, 2011.
- Expanded reporting and tax withholding from payments to vendors and contractors will be required by government payers beginning in 2012.
This change could have major impact on your business. Does this mean you must report everything you paid to OfficeMax or Staples, if you bought more than $600 from them? How many corporations do you have as vendors? I'm sure glad that this one doesn't go into effect for more than a year. It will take that long for the IRS to figure this one out and write details.
Health Benefits Must Be Reported on Employee W-2s
Starting in 2011, employers must report the value of health benefits on employee W-2 Wage and Tax Statements. It's not clear to me whether this includes the employee portion, the employer portion, or both, or whether these benefits must be reported as taxable. The other shoe has yet to drop on this one too.
For More Information
Read my article on the Health Care Reform Timeline to see what's coming and when.
“so if you paid an attorney who was part of a professional corporation, you did not have to send that corporation a 1099-MISC.”
This is not correct. All attorney’s must be sent 1099s for services, regardless of they are incorporated or not.
No they do not…the only vendors you currently need to 1099 are those that are sole proprietors, LLC..etc…that is taxed as a disregarded entity.
Page 2 of the 1099-misc instructions (see link)
http://www.irs.gov/pub/irs-pdf/i1099msc.pdf
mentions attorneys getting 1099-misc form even if they’re in a corporation.
Corporations can also receive a 1099-misc, if they receive rent payments.
I’m a Ca liberal and I’m against 1099ing property purchases over $600. It sounds to me like the kind of data they need to collect for a national sales tax, which I am also against. I’ll be letting my reps know how I feel. I hope you do, too.