Some conspiracy theorists are predicting the end of the world in 2012 and while that might be a bit far fetched some accountants are predicting the end of paying taxes as we know it and that prediction, my friends, is not so far fetched.
Nearly every photographer and small business owner is familiar with the 1099 due to our frequent use of sub contractors (second shooters) during the course of doing business. What every photographer and small business owner might not be aware of are the new laws governing 1099′s which are set to take place on Dec 31st, 2011…
All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds, fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1),6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for,shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gross proceeds, gains, profits, and income, and the name and address of the recipient of such payment.
For those of you who completely skipped that above quote let me catch you up. In the past you’d only send a 1099 to an INDIVIDUAL with whom you’ve collaborated with. Well now, thanks to a tax law tucked into the new Health Care Bill, you’ll be filling a 1099 for every Individual and Corporation from which you buy more than $600 worth of Goods or Services from during the tax year.
Let me repeat that in photographic terms because it really bares repeating:
You’ll need to file a 1099 for every lab, album company, camera store, website designer, computer reseller, etc… with whom you spend more than $600 in a calendar year.
Let’s not forget that you’ll be getting a 1099 from every business who pays you more than $600 as well. For some second and corporate shooters this could be quite a few 1099′s.
I’m sure that we can all collectively agree that this is going to increase our tax paperwork complexity to a level verging on absurdity? Let’s also agree that our accountants are going to charge us more due to the extra workload. I’m actually wondering how on God’s green earth the federal government is going to be able to process the massive amounts of paperwork this will generate.
DWF Pros have been discussing this one on the forums and one member, who happens to work in the tax profession as well, is actively encouraging us all to write our Congressmen and Senators urging them to appeal this portion of the bill. Heck I’m actively encouraging you all to write them as well.
Every DWF member should take the time to read that thread in its entirety and if you’re not a member sign-up for a Free trial but whatever you do make sure you read the information somehow and share it with your friends. We’ll all need to work together to put a stop to this little bit of madness tucked away in the dark corners of the Healthcare Reform Bill.
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10 Comments at "2012 the Year of the 1099"
It truly is madness. I have visions of tracking down Verizon Wireless’s tax id, of contacting the electric company, of having to contact every single gas station with whom I’ve purchased more than $600 worth of fuel for business travel. Ridiculous.
If you are an accountant, filing a 1099 isn’t that hard. It will just be different names and #’s plugged into the same form…what is the big deal?
You’re joking right? The sheer volume of work this will create not only for us but for our suppliers will raise our cost of doing business pretty much across the board.
You’ll have to supply your accountant with all that info. Someone will have to the do the work and in the end we’ll pay for it as business owners and consumers of goods.
Then what does the IRS do with 4 gazillion pieces of paper that will cross their desk. I honestly can’t imagine them being able to handle it.
Then what if one of the people send you one late? You have to refile or you have to wait.
This is a BAD thing and pretty much unnecessary all the way around.
Mark — I believe you would send B&H one 1099 for the entire year, not one for each order (I’m not sure if I understood your point with that statement, though — they wouldn’t send us the form, and I am sure they are already reporting every penny they send to their wholesalers). Also. unless I have been misinformed (somewhat likely!), if you use a credit or debit card for the transaction the 1099 is not necessary.
I am fairly certain I only have about 5-7 vendors that would qualify, and I am equally certain my tax preparer’s software will print the extra 1099′s for me when the time comes. I’m not convinced that the extra forms and IRS employees are going to make it harder to cheat, but I don’t see it as the end of the world for small business owners.
Yup Andy…
One to B&H
One to Adorama
One to Amazon
One to Best Buy
One to the lab that did your canvases
One to the place you bought your monitor etc…
But multiply those dozen or so 1099′s by every photographer in the country. Then consider that every photographer who spent more than $600 with B&H would be sending them one. Someone there will have to handle it, handle the late one’s and in general keep track of them. You think B&H, national labs, and other vendors are going to eat this increased cost? Not a chance. As their accounting costs go up so will what we pay.
It’s really a concern that should be thought of on a national scale not just how it will change your own accounting.
This is a VERY bad thing.
Unless this new law changes things then corporations do not receive 1099s.
Kevin (it explicitly does include corporations now see “APPLICATION TO CORPORATIONS”)
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) IN GENERAL.—Section 6041 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new subsections:
‘‘(h) APPLICATION TO CORPORATIONS.—Notwithstanding any
regulation prescribed by the Secretary before the date of the enactment
of this subsection, for purposes of this section the term ‘person’
includes any corporation that is not an organization exempt from
tax under section 501(a).
‘‘(i) REGULATIONS.—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.’’.
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.—
Subsection (a) of section 6041 of the Internal Revenue Code of
1986 is amended—
(1) by inserting ‘‘amounts in consideration for property,’’
after ‘‘wages,’’,
(2) by inserting ‘‘gross proceeds,’’ after ‘‘emoluments, or
other’’, and
(3) by inserting ‘‘gross proceeds,’’ after ‘‘setting forth the
amount of such’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to payments made after December 31, 2011.
Mark, what I mean is you can record all of your transactions in quickbooks and each vendor is kept track of. Now that taxes are going away from paper, I think it actually makes more sense. It’s not a big deal.
1099 LIVING HELL. Thank the idiots in Congress for this mess, Health Care Bill is a total joke. Guess which people in Congress pushed this disaster, not the right ones. They all had “HOPE” and now we need a miracle to save us from BIG GOVERNMENT.
How about a flat 10% Tax. No that would be way too easy and put thousands of useless Federal employees out of work.
I think this only applies to cash and checks. So if you pay your lab/vendors with a credit/debit card then you don’t have to worry.
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