1099 Rule Repealed

By April 20, 2011 Businesses

It’s official: businesses will not be required to file 1099s for payments to other corporations.  You will still be required to file 1099 forms for individuals who receive $600 or more in non-employee payments.
The highly criticized 1099 rule was part of the healthcare law and was designed to help the IRS track down illegitimate payments and under-reported income. It was projected to be a revenue raiser for the IRS, but it also had the potential to increase costs and time for record keeping for every business.  Businesses would have been required to issue 1099s to major retailers, fast food chains, and any other corporation they paid more than $600 to during the year.

As computerized bookkeeping and electronic filing continue to grow in popularity, I foresee that this is not the last we will hear of the 1099 rule.  As businesses continue to store vendor information in their bookkeeping software and the IRS continues to expand their programs that match tax returns to 1099 information returns, something like the 1099 rule could become simpler and more practical with the right technology.  This certainly appears to be in line with the Service’s goals of reducing the tax gap for businesses.