Got W-9? How New Health Care Bill Form 1099-MISC Requirement Will Drown You in Paperwork


This post is in: Business
13 Comments

10-5-2010-1

Just what you need – one more administrative task put on the backs of small business owners.

Starting in 2011, any vendor or independent contractor payment that aggregates to more than $600 in a year gets a Form 1099-MISC.

In the past, we’ve only had to give Form 1099s for services and to unincorporated entities. Now everybody gets a Form 1099, corporations included, and for all payments – services AND goods.

If you buy office supplies at Office Depot, better be prepared to give a Form 1099-MISC to them if the aggregate is over $600 in a year.

Putting This Into Place

If you, like me, reimburse workers for business purchases for my company, I think it will be safer to be prepared to give a Form 1099-MISC to the company if it’s an employee. Or if your worker is an independent contractor, include the reimbursements on the Form 1099-MISC.

Get a W-9 at the beginning of the year for every single person or business you pay. If you’re not sure if the total will aggregate to $600 or more, get the Form W-9 anyway. Hold payment until you get the Form W-9 back. It seems to be much easier to collect them when they’re expecting a check.

If you’re using a program like QuickBooks, then set up the accounts so that you automatically print Form 1099-MISC at the end of the year.

These will need to be done by January 31st of the following year, so also make a note on your calendar to make sure you’ve picked up some blanks. It can be tricky getting hold of forms, and I think that’ll be especially true next year when it dawns on small businesses that they suddenly have a lot more of them to prepare.



13 Comments

  1. Diane Kennedy says:

    Judy, for now you will just need to 1099 the contractors who provide services. The supplies/products don’t need to be 1099’d until next year.

  2. Judy says:

    I’m a new landlord as of 2010 and have lots of contractors, do they all need them too for the year 2010? For 2011 when I buy supplies from menards, i’ll have to give them one too?

  3. Diane Kennedy says:

    Ryan, the Senate kicked out the provision to change the requirement. So it looks like it is on.

    Megan and I are pulling together some information on how to get into compliance with this new requirement. We’ll post it this next. If you’re on the mailing list, I’ll send you a link, along with a letter that you can hand to each vendor (imagine Costco, Home Depot, etc..) to get their info you’ll now be legally required to get.

  4. Ryan says:

    Hi Diane,

    Have you heard any thing more about this? Today is Dec. 5th, and it is getting awfully close to the end of the year. I suspect that most businesses don’t even have a clue about this law. Please update us. Thanx.

  5. Ben Brent says:

    I’m actually considering placing an ad in Coin World for people to send their gold and silver coins for me to sell on ebay on their behalf. Once the coin is sold and I can transfer the money to my bank account, I’d send the money to the person who sent me their coins along with a statement regarding the sale. After paypal and ebay fees are deducted from the balance, I would be keeping a 20% commission. This means that if the coins sell on ebay for $1000 and there’s $100 in ebay and paypal fees combined, I would send the person for whom I sold the coins $720 from the sale, therefore, my commissions would be $180 for that sale. Who would be responsible for sending the 1099 in that case?

  6. Diane Kennedy says:

    Brent, if you’re being hired to sell the coins ONLY, then he actually sends you a Form 1099-MISC. You are contracted to him, even though you receive the money. It’s his money.

    If he’s selling the coins, fulfillng on the order and stands by the customer service for it, then the sale is his.

  7. Ben Brent says:

    what would happen from a tax standpoint if I were to sell silver and gold coins on ebay on a friend’s behalf and therefore, I only take the ebay and paypal fees plus the agreed upon consignment fee?

    Thanks,

    Ben

  8. Diane Kennedy says:

    Ray,

    Great point on Seven Eleven. I’m guessing all of the gas stations and national franchise/stores will have paperwork to hand out once this starts. But what about the little Mom and Pop’s? That’s where the challenge will be.

  9. Diane Kennedy says:

    Ray,

    The confusion on WHEN this comes into law is just part of the confusion about all of this.

    Initially, the Health Care bill stated it would begin in 2012. But the President then called for it be to moved in, as part of his budget. It has either passed or is certain to pass (I’m just assuming it will or already has). I’ll report back when I know the exact status.

  10. Diane Kennedy says:

    Jenn, thanks for giving us a real example of what this means. YES! If you buy clothing and pay over $600 in the course of a year,then you need to provide a Form 1099.

    Let’s go one further… let’s say you buy over $600 worth of merchandise in the course of a year from a private party. The merchandise is then resold on eBay. You’d have to give them a Form 1099-MISC too. Can you imagine trying to collect that information at a garage sale?

  11. Ray says:

    Does this also include gasoline purchase? How do you get the 1099 info from an Arco or Seven Eleven kind of station, and where do you send a copy to?

  12. Claire says:

    I thought it was applicable to payments made in 2012.

  13. jenn says:

    whoa. I am not sure if I am understanding this correctly. I am a sole-prop and I have an eBay store which I sell clothes. Do you mean if I purchase over $600 total of clothes from one of my wholesalers in the course of a year, I will have to report this on a 1099 misc? sorry, if I am incorrect in interpreting this. Thanks

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