[Home] [Headlines] [Latest Articles] [Latest Comments] [Post] [Sign-in] [Mail] [Setup] [Help]
Status: Not Logged In; Sign In
|
Dead Constitution See other Dead Constitution Articles Title: Businesses can expect to tell IRS about suppliers Overshadowed by all the other provisions in the health care reform legislation passed by Congress this year was a new Internal Revenue Service reporting requirement for businesses that's supposed to help close what the IRS calls the tax gap -- money lost when taxpayers manage to game the system. "You're going to have to gear up for this thing," advises James Jenkins, president of Jenkins & Co., a tax firm in Southfield. "It's a lot of bookkeeping; it's a lot of tracking." Right now, when a business pays $600 or more during a calendar year for services from an independent contractor, the business must issue a form 1099-MISC to the contractor and furnish a copy to the IRS. Starting in 2012, the requirement will apply to goods as well as services. As Jenkins reads it, this means companies will have to issue 1099s to dozens or maybe hundreds of other companies. If you run a restaurant, for example, the company that supplies your bread could need a 1099. Such payments to corporations are now exempt from the 1099 Miscellaneous filing requirement, according to CCH Principal Tax Analyst Mark Luscombe. Of course, businesses can only do so much preparing for this new requirement since the details of the reporting requirements are still being worked out. IRS Commissioner Douglas H. Shulman has said he wants to "minimize the burden and avoid duplicative reporting." So, over the next several months, the IRS will seek opinions from business owners and leaders before proposing rules to implement the law, Shulman said in a May 27 speech to the American Payroll Association and the American Accounts Payable Association. Proving tax deductions When third parties provide more data to the government through 1099s and other means, it becomes harder to skirt the IRS. Jenkins said some small companies could now be running under the radar but the new reporting requirement "is going to drive them out of the woodwork." Jenkins said business owners would be wise to obtain taxpayer identification numbers from a supplier before writing a check or making the payment. "On audit, if you don't have the 1099s, they won't give you the deductions," he said. Plus, there are financial penalties for failing to file required 1099s. Amy Johnson, senior manager for Gordon Advisors, a Troy accounting firm, said businesses need to understand the rules, even though there is always a chance that a new regulation could be delayed or changed. U.S. Rep. Dan Lungren, R-Calif., has introduced legislation to repeal the new 1099 requirements, saying small businesses do not have the resources to do all the extra paperwork. However, even if the rules are scaled back, it's clear that the federal government wants more data from businesses. Credit card changes, too Under an earlier change in law, the IRS will have new reporting rules involving credit card processors, too. For sales beginning Jan. 1, 2011, a merchant bank must send the business a 1099 reporting the annual dollar figure from credit card and debit card purchases made by its customers. The same information goes directly to the IRS. If a merchant has at least $20,000 in sales on credit cards or at least 200 credit card transactions, Luscombe said, the credit card issuer would have to report that information to the IRS the next year. In his prepared remarks at the end of May, Shulman said the IRS plans to use its administrative authority to exempt business-to-business transactions conducted with payment cards from the new requirement to report the purchase of goods. "These transactions will already be covered by reporting requirements on payment card processors, so there is no need for businesses to report them as well." He said. "So, whenever a business uses a credit or debit card, there will be no new burden under the new law." While such rules could help deal with credit and debit card sales, Johnson noted that businesses would still have the 1099 requirement when a company pays a supplier by check. Right now, she said many businesses may not be aware of the upcoming change. "I think they will be surprised," Johnson said. But better to be surprised by a reporting requirement than an IRS investigation.
Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 2.
#2. To: DeaconBenjamin (#0)
deleted
There are no replies to Comment # 2. End Trace Mode for Comment # 2.
Top • Page Up • Full Thread • Page Down • Bottom/Latest |
||
|
[Home]
[Headlines]
[Latest Articles]
[Latest Comments]
[Post]
[Sign-in]
[Mail]
[Setup]
[Help]
|
||