A 1099 Reporting Mess

A provision in the Patient Protection and Affordable Care Act enacted in March 2010 requires reporting on Form 1099-MISC Miscellaneous Income by vendors paid over $600 for the purchase of "goods" during the year. Under prior law the Internal Revenue Code requires Form 1099-MISC only for purchases of "services" not "goods" and specifically excludes reporting transaction with corporations. For goods purchased after 2011, Form 1099 will be required if annual purchases of business supplies, materials or other tangible goods exceed $600.

Businesses of all sizes will be required to create new record-keeping protocols. All vendors will need to provide purchasers with the information required on Form 1099: name, address and tax identification number (TIN). The vendor’s TIN must be associated with each purchase, as multiple small purchases throughout the year may reach the annual threshold. Businesses that annually issue more than 250 Forms 1099 are required to electronically file. Sole proprietors who previously used their social security numbers to conduct business should obtain an Employer Identification Number (EIN) to avoid identity theft issues. If a vendor fails to furnish a correct TIN, the business is required by law to impose back-up withholding at the rate of 28% of the purchase price, and also must prepare and file Form 945, Annual Return of Withheld Federal Income Tax.

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