Possibly the most significant reporting change included in the health care reform bills for small businesses is the change in 1099 reporting, which bears no specific relationship to the health care insurance system, the primary focus of the bills. The Patient Protection and Affordable Care Act (“PPACA”) includes a provision that expands the reporting requirements for reporting trade or business expenditures annually to the IRS. The expenditures generally were reportable when they hit a $600 threshold for services rendered and generally were not reportable if the payments were made to a corporation.
PPACA has expanded this reporting requirement in two ways. First, it has extended the reportable payments to include those made to corporations (except those that are exempt under IRC Section 501(a)). Second, it has expanded the types of payments that are reportable by including expenditures for property as well as services.
Because of the increased scope of reportable expenditures, small businesses will likely find that they have a significantly larger number of 1099’s to file at year end. Identifying these additional reportable payments, procuring the required information from the payees, and producing the Forms 1099 will assuredly create a heavier burden for the average small business.
These provisions will go into effect for payments made during tax years beginning after December 31, 2011.