Congress Approves 1099 Repeal Bill But at a Cost to Some Taxpayers
On April 5, 2011, the Senate approved a bill to repeal controversial expanded information reporting on Form 1099 for certain businesses and rental property expense payments. To offset the cost of lost revenues from the repeal, the bill also increases the recapture amount of health care credit overpayments. President Obama is expected to sign the bill when it reaches the White House.
A Little History
In March, 2010, Congress approved the Patient Protection and Affordable Care Act (PPACA) which included, among its revenue raisers, an expansion of the Form 1099 reporting requirements. PPACA required entities to file a Form 1099 when they purchased $600 or more from a single provider of goods or services, including corporations (except when the vendor is tax-exempt), beginning with payments made after December 31, 2011. Almost immediately, businesses voiced concerns about the burden of reporting under these new requirements.
The Repeal Bill removes the new reporting requirements, therefore returning the Form 1099 reporting requirements back to their original format. Specifically, businesses must continue to issue Form 1099 for payments of $600 or more to service providers (except corporations, with certain exceptions.)
Rental Reporting Repealed
In September, 2010, Congress approved the Small Business Jobs Act of 2010 (SBJA) which required all Landlords to issue Form 1099’s for certain rental property expense payments of $600 or more. Under the SBJA, this reporting requirement was not specifically limited to just landlords whose rental operations amounted to a trade or business; it included individual taxpayers (except those whose rental income was not more than a nominal amount.)
The 1099 Repeal Bill removed the requirement to issue 1099 forms for these rental property expenses as if that section of the SBJA had not been enacted.
To pay for the cost of the repeal (estimated at approximately $25 billion over 10 years), the Repeal Bill amended another section of the PPACA.
Beginning in 2014, taxpayers who meet specific criteria and who purchase qualified health care coverage through an American Health Benefit Exchange are entitled to a refundable income tax credit. This credit can be advanced to the taxpayer based on their income for the prior year. If the advance payment exceeds the allowable credit in the following year, the excess is an increase to the taxpayer’s taxes for that year up to a certain amount (the cap). To pay for this repeal, the amount of the cap has been increased.