Discussion:Health Care Credit and new 1099 requirements

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Discussion Forum Index --> Tax Questions --> Health Care Credit and new 1099 requirements

Seanderson (talk|edits) said:

21 May 2010
Does anyone know how the Health Care Credit will flow to S Corp Shareholders?

Also, am I understanding correctly that there will be new 1099-MISC rules effective in 2012 which stipulates that all entities will be required to receive 1099's if they make over $ 600?

RivesCPA (talk|edits) said:

21 May 2010
5% owners and/or 2% S-corp shareholders will not be eligible for the credit.

Yes beginning in 2012, there will be a 1099 reporting requirement for all entities that you pay over $600 with the exception of tax-exempt entities.

Seanderson (talk|edits) said:

21 May 2010
Yes, I know but the credit the S corp will receive on behalf of their employees, how does the corporate get the credit?

Actionbsns (talk|edits) said:

21 May 2010
The material I printed from the IRS website indicates that the credit will be applied on the tax return. If that's the case, and S corps or partnerships pay no taxes, it's a non refundable credit, so who gets the credit?

TTMM (talk|edits) said:

22 May 2010
Are you new here? Seanderson do a search in the yellow box.

Scot1 (talk|edits) said:

22 May 2010
TTMM - if I'm not mistaken I believe the title of this forum is Tax Questions. I would imagine the credit flows through to the individual shareholders as most credits do with pass-through entities.

Harry Boscoe (talk|edits) said:

22 May 2010
The new 1099 requirements apply to payments after December 31, 2011. The new rules are not for 1099s issued in 2012, they are for 1099s issued in 2013, for 2012. Just to clarify.

Folks who are writing about this are being really lazy about describing the effective date. Like they're in denial or something...

Harry Boscoe (talk|edits) said:

22 May 2010
And the threshold for the 1099 reporting is "$600 or more" not "more than $600." Just to clarify.

TTMM (talk|edits) said:

22 May 2010
Scot1 I probably should have included a LOL. I was being sooooo sarcastic.

I started a thread about the absurd 1099 requirement right after the passage of the bill and the question has been asked a couple of times since then.

Scot1 (talk|edits) said:

23 May 2010
Sorry TTMM, I'm a bit slow. I agree, I think the current 1099 requirement is absurd, I don't even know what to call the recently enacted legislation! A compliance nightmare.

Harry Boscoe (talk|edits) said:

23 May 2010
Some have speculated that the cost of compliance with this nightmare law will easily exceed the amount of added tax revenue collected by Our Uncle.

Whaddya think?

I don't have, now, anything that adds up all my payments to each vendor for the year. Oh, no, that's not right. I have an adding machine, and it's totally paid for. So summing up the payments by vendor will be *free*, right?

Uh, don't think so.... Refrigpbrerator.

Scot1 (talk|edits) said:

23 May 2010
So our modest CPA firm buys paper, toner, etc. from Staples/Office Max and spends $800 over the course of a year, our 1099 along with thousands (millions) of other 1099's will tell the IRS what? What about the individual that spends in excess of $600, they're exempt. It basically tells uncle that the 1099's are less than total revenues reported by mega-office supplier - crazy! What if I buy a printer/copier from mega-office supplier (for $601) for our firm and get reimbursed from our firm; does my firm issue me a 1099 - I think not. I'm an employee, employees aren't supposed to get 1099's. It's a reimbursement under an accountable plan, therefore it doesn't go into my W-2!

Getting SSN's and EIN's for all vendors will really excite our clients that cannot afford a full-time bookkeeper/accountant or pay our fees for this added compliance nightmare.

I can see some benefit to uncle for the 1099-K requirements, but the added burden imposed under the 1099-MISC requirements is just that in my opinion - a BURDEN.

Actionbsns (talk|edits) said:

24 May 2010
The 1099 MISC has always been a stupid form. I've been in business for 30 years and in any given year I have received as many 1099's as I don't. That doesn't preclude me from reporting the income which was not 1099'd, and I keep telling that to my clients. The dollar figure from the 1099 just let's the government know to expect at least that amount on the tax return. Making us prepare hundreds more of these ridiculous forms isn't going to bring anyone into compliance with rules and it most likely won't circumvent the underground economy by much. Does anyone think that the presence or absence of 1099's is going to actually affect what Chevron Oil, Staples, Costco, Office Max report on their tax returns? Well maybe the idiot who thought this was a good idea and put it in the bill - but then he probably never ran a business.

TTMM (talk|edits) said:

24 May 2010
This isn't aimed at the Staples, and Office Max's of the world. This is aimed at small to medium size and cash businesses that don't report all of their income. If you think about it, how many articles have you seen at the IRS website or on one of their newsletters about the "tax gap". Well this is obviously one idea to close that.

Since most small to medium businesses are on the cash basis it will be real easy to match everything between your tax return and the 1099s. If it doesn't match, the computer just sends out a notice. No warm body needed.

I could also see a new form where the taxpayer has to reconcile the 1099s issued or received to what's reported on the tax return if they are accrual basis. So for instance, you enter the total 1099s you issued for expenses and then show what you accrued and why. Also you would have to reconcile for 1099s not issued and why. So all the IRS has to do is focus on collecting all those fines for not having health insurance.

AKCCPA (talk|edits) said:

May 24, 2010
This should serve its purpose well. Although the next "planning" tool for most cash based businesses will be to aquire fiscal year ends so the matching is nullified. So many ways around it is the problem for such an onerous burden on the rest.

CathysTaxes (talk|edits) said:

24 May 2010
If it is only aimed at small to medium sized cash businesses, then why require 1099's to be sent to the large incorporated businesses? And why for all the purchases?

The IRS computers can easily match up 1096 forms to business tax returns (including Schedule C's). If various expenses do not have corresponding 1099's, then audit these businesses and require them to 1099 everything and anything.

JR1 (talk|edits) said:

May 24, 2010
Riddle me this, Batman: When every transaction is reported on a 1099, IRS can then match up every dime of revenue and expense for every business, can they not? Who needs auditors? Think about that. And we really will need barcodes in our heads to ease the reporting.

Actionbsns (talk|edits) said:

25 May 2010
So, Dana, if there is a new form to reconcile the 1099's to the tax return income reported, and that income is higher than the total 1099's (which mine always is), then will we only have to report what we reconcile too? It's still a nonsensical form which is going to cause tremendous headaches. And even if it's not aimed at the major corporations, a 1099 still has to go to them. That makes no sense.

TTMM (talk|edits) said:

25 May 2010
My point was that the government feels that it's the small and medium size businesses where they can generate more money and close the "tax gap". Large corporations typically have IRS agents 24/7 auditing their books. And the IRS isn't looking for the cash job the major corp had and didn't report. This will require you to report the cash job if the vendor wants the deduction.

But if you don't have to send them to major corporations how would you draw the line? By total assets, by total sales? That would be worse then sending them to everyone. Plus the IRS can office audit the small businesses via a computer notice or reconciliation form and not have so many auditors sitting around sorting receipts. Since the taxpayer has sent out 1099s to everyone, the IRS now has third party verification of your return, all without lifting a finger.

Of course we would have to report all income because you would have sales to a customer of less than $600 but there would be a reconciling item for that. I was thinking that you would have a column titled 1099s received, transactions under $600, and then an accrued items column with a requirement to attach a schedule.

I really think this is the starting point to many burdensome requirements to pay for the latest giveaways and that many nasty things will come from it.

Fsteincpa (talk|edits) said:

25 May 2010
This article will show what the IRS plans for medium to large more complex corporations.

http://www.businessweek.com/magazine/content/10_22/b4180032368610.htm

Can you imagine? This is getting ridiculous.

Trillium (talk|edits) said:

25 May 2010
Fred's article is about the proposals for disclosing uncertain tax positions; Announcement 2010-9; also see Announcement 2010-30 which announces and links to the draft schedule.

Here is a prior discussion about this: Announcement 2010-09, disclosing uncertain tax positions.

Fsteincpa (talk|edits) said:

25 May 2010
Trillium, this appears to be in addition to the UTP filing requirements. Look at the 2nd to last paragraph where it specifically states it's a piggyback situation.

They want to know all situations within a tax return where there could be more than one number inserted and then what the max tax implication could be. For instance, the simple decision on whether to section 179 a piece of equipment or to depreciate it over time. It is not a UTP situation at all, just the choice made by the client.

Trillium (talk|edits) said:

25 May 2010
I may be wrong, as I'm recollecting this from when it first came out, but I thought the UTP detail was the piggyback. The actual rule is FIN 48 (or whatever section that is post-codification) more like you should disclose uncertain positions; it could be seen as something of a protective choice (e.g., changes the categories of penalties you might fall into from a tax perspective, or from an accounting perspective it's like the old FAS 5 decisions - albeit taken to extreme now, by FIN 48?), whereas the IRS is shifing it into a tax filing requirement (edited to add: i.e., put it all on a form with extra details, and file it w/the tax return, as opposed to F/S disclosure reqmts). I should go read up on it again before asserting all of that as fact, however.

Fsteincpa (talk|edits) said:

25 May 2010
I am not positive. I at first thought you were correct til I re-read the article. The thing that makes me think it is different is the issue of amortization/depreciation. Is that a UTP issue? If it is, then I would agree that you might be right, but if not, then this would be something different.

I'm hoping you are correct actually.

Fsteincpa (talk|edits) said:

25 May 2010
The statement from the 2nd to last paragraph of the article specifically says in addition to the UTP/red flag issue.

I seriously hope I am wrong and that they don't want to go even further.

Trillium (talk|edits) said:

25 May 2010
I believe they are saying that the IRS is trying to piggyback on FIN 48's UTP disclosure rules (what BW calls "an accounting rule") - the "Schedule UTP" stuff in announcements 2010-9 and 30 goes much farther than FIN 48 does.

Fsteincpa (talk|edits) said:

25 May 2010
Maybe it's a good time to shift my practice back to doing more single audits.

CrowJD (talk|edits) said:

25 May 2010
Excuse the length of my post. We are talking about the Federal Budget here because that's the root of the 1099's and other proposed "crack down" provisions. This is in no way an anti-GOP post as you will see by reading it.

While this is being written, members are being chosen to serve on the conference committee of the financial reform bill.

There is a move afoot to get rid of Blanche Lincoln's (good) provision requiring banks to spin off their dervative trading so it is not insured by taxpayer money. Her provision made it into the final Senate bill that is moving into conference with the House. For the most part, derivative trading is nothing more than gambling outside of Las Vegas.

I mention this because the country is broke primarily because we spent (it's gone) 2 Trillion dollars to bailout Wall Street. We don't really know because the taxpayer is being denied the right to audit the Fed.

2 Trillion is a ton of money. What's this have to do with 1099's and closing the tax gap? It's not hard to figure that one out.

.* For those wanting to read more about this, you can check what Barney Frank is up to today, and it ain't pretty.... (by the way politicians & Wall Street do not use the word "derivative" anymore becuase the public is on to it. They use the word "swaps" now). You can imagine I'm pretty furious with Barney Frank right now: http://www.businessweek.com/news/2010-05-25/frank-says-lincoln-derivatives-measure-goes-too-far-update1-.html

Those interested (which should be every American taxpayer) may want to let their representatives in Congress know what they think about this.

Why should banks be able to gamble with taxpayer insured money inside banks? They should be made to spin the gambling activity off into non-taxpayer insured entities. This keeps the gambling from bringing down the banks.

By writing this, I am NOT suggesting that we debate this here. There is no time for debate. If interested, by all means let your Senators and Congressmen know soon.

Actionbsns (talk|edits) said:

26 May 2010
RE: The health care credit. Another caveat is that the calculation of the credit is limited by the average cost of small group insurance by state. I did a google and bing search to see what came up, the only state I found with a figure that could be used was Missouri. So where are we supposed to get that? I checked the IRS website, too for a list, but nothing came up. I sure hope they come up with some kind of calcultor via form or our software programs for this because it's going to be a fun ride. (She says sarcastically)

Trillium (talk|edits) said:

26 May 2010
Action - Brand new: Rev. Rul. 2010-13.

Actionbsns (talk|edits) said:

26 May 2010
Thanks Trill, that's going to be really useful come January.

Actionbsns (talk|edits) said:

26 May 2010
I am working on a letter to clients regarding the new employer credits available and a discussion regarding the change in the rules for 1099's coming up. I've searched here for something simple to offer for the 1099 issue, but my search isn't bringing up what I'm looking for. Does anyone have a link to something easy for a client to understand. I have a few clients who have problems getting 1099 information together on a good day, and this is going to make things way worse. I'm hoping to impress upon them that their attitudes and efforts really do need to change because what has always been a nuisance can now become a nightmare for them if they aren't prepared.

JR1 (talk|edits) said:

May 26, 2010
Trying to write my next client newsletter, without sending everyone off the cliff. What's going thru my head? As to the 1099's, IF this remains in effect...EVERY client will now be (biz clients!) required to use QB and to take no shortcuts for vendors. EVERY vendor will have vendor profile, and be checked for 1099's. Every client that I've kept books on a spreadsheet, or who do their own in some easy fashion, or use One Write systems of one type or another: it's over. And face a huge fee increase since my time will increase beyond comprehension. I'm teasingly going to tell them that I will select the one client to work for for 100k per year.

There's no easy way to put this, and no easy way to do the job.

Belle (talk|edits) said:

May 26, 2010
I'm attending a class tomorrow on the HIRE Act & Healthcare Reform, etc. I'll try to report back with any pertinent insight on whether those experts think this is going to stick.

CathysTaxes (talk|edits) said:

26 May 2010
So, if a business pays the IRS $600 or more, it has to 1099 the IRS.

If a business pays property taxes of $600 or more, they have to 1099 the county.

Water bill, electric bill, natural gas bill, garbage pickup, insurance premiums

Actionbsns (talk|edits) said:

26 May 2010
Thanks, Cathy, for adding a slew of people I hadn't thought about! (little rolly eyes thing here). I don't think you'd need to 1099 IRS though, because doesn't the basic parameter of "allowing or helping to run your business" still apply? IRS doesn't help most people in the operation of their businesses.

AKCCPA (talk|edits) said:

May 26, 2010
Seems to me you go straight down the P&L and anyone paid over $600 for the year you 1099. Gas stations for auto, 1099 the charities for charitable contributions, and 1099 the banks for the bank charges on your account.

TTMM (talk|edits) said:

27 May 2010
Actually the law exempts 1099s to 501(a) organizations and the regs currently say that you don't have to send one to the US and state governments so I assume that wouldn't change.

Current code says premiums so I guess you would send one to the insurance company. I hadn't thought of the bank for bank charges. You'd have to send one to the credit card processing company too.

JR1, why don't you develop software for those people who use spreadsheets, one write systems etc that would be easy enough for them to use. In fact I think One-Write has a software program. But I agree, I've been teasing people that this will be great for my bottom line!

CathysTaxes (talk|edits) said:

27 May 2010
Action, I think to be a PITA and we should all 1099 the IRS. Could you imagine the post office getting 1099's for all the postage/shipping? Heck, I wouldn't mind sending 1099's to eBay and PayPal for all the darn fees I've paid them (I betcha they are hiding my payments, bad, bad).

Maybe it's time I look at my old backups. I had developed a 1099 application a few years ago. It shouldn't be too hard to re-engineer it to interface with a spreadsheet.

Actionbsns (talk|edits) said:

27 May 2010
Better yet, let's all send 1099's to IRS via the guy who thought this was such a great idea. He might just re-think that position.

CathysTaxes (talk|edits) said:

27 May 2010
Oh, Action, you are bad. We can find that provision's sponsors, make up a phony business and 1099 the daylights out of them.

So, if a business contributes to some politician's campaign fund, does it have to send a 1099?

Actionbsns (talk|edits) said:

27 May 2010
Not unless there was a bribe involved that helped the business owner in his/her business.

Kathyt (talk|edits) said:

28 May 2010
Yesterday the IRS commissioner made the following statement concerning the 1099 reporting, is it just me or would this actually make it more difficult? He said if you use a credit/debit card those transactions would be exempt from 1099 reporting because they will already be reported on an information statement from the credit card processing company. So am I reading too much into this or would it mean that if you write a check to Walmart it counts for a 1099 reporting, but if you use your credit/debit card it does not, so do I need to set up two different vendors in my software, one for credit/debit card (no 1099) and one for check/cash (send 1099). Here's what he had to say:

January of 2013, business groups – particularly those that represent small businesses - have raised concerns about the burden that this new provision may impose. I want to assure the business community that the IRS will look for opportunities to minimize burden and avoid duplicative reporting. That is why we will be spending the next several months soliciting input from businesses of all types and sizes before proposing regulations to implement the law. We will also look to service providers who help those businesses understand and adapt to new laws and regulations, to help us craft a process that is as efficient as possible. We know that there is no “one-size-fits-all,” so we want to hear your ideas.

At the risk of getting ahead of the game, I wanted to share with you just one example of how we are analyzing this provision, and looking for opportunities to streamline implementation and minimize burden. We plan to use our administrative authority to exempt from this new requirement business transactions conducted using payment cards such as credit and debit cards. 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. So, whenever a business uses a credit or debit card, there will be no new burden under the new law.

CathysTaxes (talk|edits) said:

28 May 2010
So, when I write a check the USPS for postage, I should 1099 the Post Office!

Kathy, a vendor for cash/check and vendor for credit/debit would be a major PITA.

Looks like the accounting software applications need to add 1099 info to the invoice level (which BTW is what the accounts payable applications for large corporations have, I know because I used to install/enhance/support them).

Jerrykern (talk|edits) said:

28 May 2010
I take it Shulman is talking about how the IRS intends to operationalize the new 1099 requirement, because that credit card/check segregation thing isn't in the law that I can see. I was a little miffed about the new reporting requirements, but had rationalized that the way it stands now, I have to do analysis on who should and who shouldn't get a 1099, and under the new method, I'd just 1099 everyone. More expense, but less analysis time. If the check/credit card thing is enacted, I've taken one step forward, two steps back...or maybe just three steps back.

Waynecpa (talk|edits) said:

28 May 2010
I suppose we can encourage clients to pay everything with a credit or debit card and not do business with anyone that does not accept them.

Of course, then our time will be spent trying to make sure that credit cards statements are reconciled...

Belle (talk|edits) said:

May 28, 2010
I think "the IRS commissioner" needs to come work in my office next January and see exactly what's involved in 1099 processing - under the existing laws. Then I double-dog dare him to say the new law (effective for 2012/reporting in Jan 2013) won't create a new burden. H*ll, I'l even pay him to come do the work!

Waynecpa (talk|edits) said:

28 May 2010
If you're going to pay him as an independent contractor, be sure to get his SSN so you can give him a 1099 :-)

Actionbsns (talk|edits) said:

28 May 2010
OOOOOH! Belle, you're going to double dog dare him?!!!! That's a challenge. He'll be so ascared he'll change his mind. Yeah!!

CathysTaxes (talk|edits) said:

28 May 2010
Belle, I'll pay his traveling expenses to your office!

Harry Boscoe (talk|edits) said:

29 May 2010
Do I have to get the waiter's SSN for the cash tip I left him, in case by the end of the year I've tipped him $600 or more for business dinners?

Msmith7305 (talk|edits) said:

29 May 2010
The biggest fallacy to the 1099 reporting is that it only applies to businesses. All the revenue received by businesses from the general public (retail) will remain exempt from 1099 reporting. HUGE cost for our clients for virtually little gain to government. Also may hurt the smaller vendors if, for example, their customers decide to consolidate purchases to one vendor as opposed to many just to keep number and effort for 1099 reporting down.

Harry Boscoe (talk|edits) said:

29 May 2010
Can I just give the merchant a 1099-TRANS [a 1099 that reports just the one transaction] at the time of the purchase, or is there some aggregate-and-wait-till-after-the-end-of-the-year requirement?

I'm with Msmith: "HUGE cost for our clients for virtually little gain to government."

Harry Boscoe (talk|edits) said:

29 May 2010
And how soon will it be "Check here for 10% discount for non-business cash purchases"?

Tampa Taxman (talk|edits) said:

30 May 2010
Jerry, "The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions."

And I'm sure if it's easier for you to report *both* credit card and check transactions that you'll be allowed to do so.

Now what happens when you buy a used computer from someone off eBay, and pay them by check or money order? Now you've gotta get their EIN, or if they don't have one (maybe they don't own a business), their SSN? Yeah, that's going to happen.

It's going to be interesting seeing what the final treasury regulations look like. I've already been warning my clients about this, but with the caveat that 1) the treasury regulations aren't yet out; and 2) the law might change between now and then.

Actionbsns (talk|edits) said:

30 May 2010
Can you imagine the nightmare of 1099's that people send out duplicating transactions, overstating income to taxpayers? Sooner or later, someone's going to get a letter saying "Excuse me, but you reported $80,000 of income, but we have 1099's saying you were paid $150,000. 'Splain that to me Lucy!" Of course, that letter will line our pockets, but what a time waster.

Belle (talk|edits) said:

August 12, 2010
From a news source I subscribe to...

"The Senate Democrats have proposed scaling back new IRS 1099 reporting rules that were part of the new health-care law (House of Representatives counterparts backed repeal of the requirements last week)."

Perhaps there's hope to stop this nonsense...

OCNumberz (talk|edits) said:

13 August 2010
With all this talk of "Going Green"...

by the time this happens, I wouldn't be surprised if all this 1099 filing goes on strictly online. They really want efilings, and I have 3 clients who still don't have their measly $25 checks cashed for the 3/1/10 Statement of Information filing with the CA Secretary of State because of manpower shortages. Others who have processed online are good to go. So, I could envision there being a place to get your payee's identifier online as it would be difficult to get all payees to volunteer a W9. By a certain deadline, payors will have to upload their info. Then the info will be available for taxpayers and tax preparers to download it. The tax programs we're now using will probably enhance their systems to accommodate the data directly from an online database.

I know many situations where sole proprietors who don't keep a formal set of books, will ONLY claim income if they receive a 1099..so I see where the IRS is coming from.

Fsteincpa (talk|edits) said:

13 August 2010
If it does come to pass, and I really don't see it coming to fruition, that it will be rescinded, only because it is stupid.

And, if it does come to pass, purchasers of goods are going to have no way of knowing which businesses are affiliated with which and the gathering aspect is going to be in the receipt.

Each receipt given to customers are now going to have all of the information required so that reporting becomes easier.

What it truly means is that our clients are really going to have to keep an up to date and a good set of books, not the garbage we sometimes get and adjust so that we can prepare returns.

OCNumberz (talk|edits) said:

13 August 2010
not the garbage we sometimes get and adjust so that we can prepare returns.

Fred, Ain't that the SAD truth! : (

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