The 1099 Revolution – Are You Ready?

Beginning January 1, 2012, virtually all payments by a trade or business aggregating $600 or more to any single vendor during any calendar year will have to be reported at the end of each calendar year to that vendor and to the IRS on Form 1099. Vendors include almost anyone a trade or business pays in the course of doing business other than its employees, whose compensation is already reported on Form W-2.

Currently, 1099 reporting applies only to amounts paid to unincorporated businesses, generally understood to be independent contractors for services. Implementing this change will require collaboration among businesses, software vendors, and CPAs to help correctly identify, characterize, and report these transactions.

NOW is an opportune time to start thinking about the massive increase in recordkeeping that will be required. Businesses will now be required to obtain tax identification numbers (TINs) for EVERY party with which they make a purchase. Valley Oak Financial encourages all businesses to begin preparing systems and procedures NOW to routinely obtain and record data for these transactions. Trying to do this after the fact would be extremely challenging and costly. Please ask us how we can help.