The 1099 Paper Storm

The IRS to Require More Reporting

The government is convinced that there are millions of dollars of unreported income (no tax is being paid on unreported income). The government's way of forcing the reporting is a new requirement that every business is to report how much it pays for goods and services and who they pay the money to. Currently every business has to send a 1099 report to the IRS for every person that is paid more than $600 per year, if they are not an employee or another corporation. In the past the small business did not have to send 1099 reports to any company that they did business with. They only sent 1099s to self employed persons. The same reporting rule applies to a business that is a one-person sole proprietor type business who hires an occasional person to help him.

Now Comes the 1099 Storm

Soon the small business owner will have to send a 1099 to just about every person or business that he pays more than $600 to in a year. That includes sending 1099s to the big box stores, (such as Home Depot and Lowes, and Office Depot). Of course, the business has to send the 1099 information to the IRS. This even includes sending 1099s to the local gas station, any vendors that the business does business with and a 1099 to your land lord if you rent an office or place of business. Even send a 1099 to the utility company. This requirement from the IRS will put a big burden on the small business. Not only does the small business has to report all this information to the IRS but has to send a 1099 to every business and person he did business with during the past year. This requirement will increase their time on tax paperwork by at least 500%.

This will eat into the small business very slim profit margin. All this is in addition to the new health insurance requirements. You know, of course, that when you send a 1099 to anyone, including another business, you need their ID information. This will cause a lot of unnecessary work and hassle. What happens in a disaster and you need immediate help? Are you required to get all the proper paperwork and ID information just to get someone to clean up the place? The IRS is gearing up for this onslaught of new reporting and paper. Business that has over 25 employees will be required to report via computer. There are thousands of small businesses that will be filing a paper 1099. You can check at IRS.gov site for full text.

Sara is a business professional. She has written over 5 books and many articles. She is also a business consultant.
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