Our Human Resources Blog

 Small businesses may soon be burdened with a new set of reporting requirements that could potentially create huge amounts of additional paperwork.  Under the Health Reform Bill passed in May of this year, a new tax reporting regulation would require organizations to file IRS forms when they buy goods exceeding $600.

 Beginning in 2012- all businesses, governments and charities will have to issue 1099’s to each company they buy goods and services from – if they pay those vendors more than $600 a year. Currently, businesses are required to record income payments made each year to non-employees (people who work for a business, but aren’t employees) and unincorporated contractors for the purchase of services, when the payments exceed $600. Under the new rules, organizations would also need to issue 1099’s to include payments made to corporations and for services, as well as goods.

 While the new provision was intended to improve tax reporting and reduce the number of IRS audits-- for small companies, this added burden could swamp them administratively. It could push the average number of 1099 filings from 10 per year to more than 200 filings per year.

 Many groups are pushing hard for a full repeal of this regulation. While there is a strong chance for this to be overturned, it’s not too soon for employers to plan on how they will manage and allocate the resources necessary to maintain the additional level of detailed record keeping and paperwork.