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On April 14, 2011, the President signed the "Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy
Overpayments Act of 2011." This new law retroactively repeals unpopular Form 1099 information reporting rules added by
2010 legislation.
Here are highlights of the tax changes in the Act.
Original information reporting rules. Before amendment by the Small Business Jobs Act of 2010 and the Patient Protection
and Affordable Care Act, Code Sec. 6041 generally required payments totaling at least $600 in a single calendar year to
a single recipient to be reported to IRS. Reporting on Form 1099 was required only when the payor was considered to be
engaged in a trade or business and has made the payment in connection with that trade or business. The type of payment
that most commonly triggered the reporting requirement was payment for services.
There were a number of exemptions from Code Sec. 6041's reporting requirements under prior law, notably including
payments to corporations.
Pre-Act law-changes made by 2010 legislation. Beginning in 2012, Sec. 9006 of PPACA added payments of amounts in
consideration for any type of property and gross proceeds-i.e., it added payments for goods or other property-to the
list of payments subject to information reporting.
Sec. 9006 of PPACA further provided that, beginning in 2012, payments to non-tax-exempt corporations-which had
previously been exempt from the reporting requirement-would be subject to information reporting. Additionally, for
payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person
receiving rental income from real estate would be treated as engaged in the trade or business of renting property
for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a
service provider (for example, a painter or plumber) in the course of earning rental income would have to provide
an information return to the service provider and IRS.
New law. For payments made after Dec. 31, 2011, the Act repeals the provisions in Sec. 9006 that impose a
reporting requirement for payments to corporations and payments for goods or other property. And for payments made
after Dec. 31, 2010, the Act also repeals application of the information reporting requirements to recipients of
rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting
property.
If you would like more details about any aspect of the new legislation, please do not hesitate to contact us.
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