Health Care Reform 1099 Reporting

The following is a brief overview of the key IRS Form 1099 reporting changes affecting individuals and businesses in the recently enacted 2010 Small Business Act and the 2010 Health Care Act. Please call our offices for details of how the new changes may affect your specific situation.

Form 1099 Reporting Requirements under Current Code

• All persons engaged in a trade or business, who make certain “payments” of $600 or more in any year made to another person must issue a Form 1099 to that person
• “Payments” reported are rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments and other fixed or determinable income
• This precludes many taxpayers for whom their rental activity is considered passive in nature (and therefore not a trade or business).
• Payments made to corporations do not require the issuance of a Form 1099.   

Form 1099 Changes Effective for Tax Years beginning after December 31, 2010 (2011 and Forward)

• Beginning in 2011, for purposes of the Form 1099 reporting requirement, a person receiving rental income from real estate will be considered to be engaged in a trade or business of renting property.
• Also beginning in 2011, any individual who receives rental income of not more than the minimal amount, as determined under IRS Regs will not be subject to the reporting requirement. This minimal amount is unknown at this time.
• Additionally beginning in 2011:

1. Per return (Form 1099 issued to IRS) penalties have doubled ($50 to $100) and aggregate penalty caps have been severely increased ($250,000 to $1,500,000).
2. Per statement (Form 1099 issued to Payee) penalties have doubled (In General - $15 to $30) and aggregate penalty caps have been severely increased ($100,000 to $1,500,000).