1099 repeal eases some requirements, but leaves new ones for 2011
BY GEORGE G. JONES AND MARK A. LUSCOMBE
The Comprehensive 1099 Taxpayer Protection and Repayment of Ex- change Subsidy Overpayments Act
of 2011, which passed Congress on April 5,
2011, eliminates two recently enacted 1099
reporting requirements that were to take effect in 2012. Still on the books, however, are
a couple of new 1099 reporting requirements
effective for 2011.
The Patient Protection and Affordable Care
Act of 2010 had expanded the requirements
for 1099 reporting by businesses to include
payments to corporations, which had been
exempted from the prior requirements, and
also expanded the reporting requirements to
include goods as well as services. The changes were to become effective in 2012.
Businesses expressed concern about the
burden that the new reporting requirements
would create. Although there were some initial proposals to raise the reporting threshold
higher than $600, ultimately support grew
for a general repeal of the additional reporting requirements. These additional reporting
requirements have now been repealed.
may now be
them purchase health insurance can receive
advance payments on the credit to help pay
for health insurance. If it turns out that the
taxpayer receives a larger advance payment
than the credit to which they ultimately prove
to be entitled, the health care legislation included a repayment provision with caps.
The repeal legislation modifies these repayment caps by raising them based on the
income level of the taxpayer. The old maximum cap was $400. The new cap could be as
high as $2,500 if household income is at least
300 percent above the federal poverty level.
RENTAL PROPERTY EXPENSES
Another 1099 reporting requirement had
been added by the Small Business Jobs Act of
2010, requiring individuals who are landlords
to report rental property expense payments
of $600 or more made with respect to rental
real estate. This change was also to become
effective in 2012. Although this provision was
not as widely criticized as the business reporting provision, complaints by landlords
were sufficient for Congress to include repeal
of this reporting provision in the legislation
that passed on April 5, 2011, as well.
1099 REPORTING FOR 2011
Even with this repeal legislation, there remain
a couple of new 1099 reporting requirements
effective for 2011. The Energy Improvement
and Extension Act of 2008 requires that bro-
kers, when reporting the sale of securities to
the Internal Revenue Service, also include
the customer’s adjusted basis in the sold
securities and classify any gain or loss as
long- or short-term. A covered security is any
specified security acquired on or after the
applicable date if the security was acquired
through a transaction in the account in which
the security was held or was transferred to
that account from an account in which the
security was a covered security, but only if
the broker receiving custody of the security
receives a statutory statement with respect
to the transfer. The applicable date for corpo-
rate stock is Jan. 1, 2011. For stock in a mutual
fund or stock acquired in connection with a
dividend re-investment plan, the applicable
date is Jan. 1, 2012. For other securities, the
applicable date is Jan. 1, 2013.
George G. Jones, JD, LL.M, is managing editor, and Mark A. Luscombe, JD, LL.M, CPA,
is principal analyst, at CCH Tax and Accounting, a Wolters Kluwer business.
Both reporting requirements had been inserted in their respective legislation to help
pay for health care reform and small-business tax breaks. To offset this decline in revenue, the repeal legislation includes an offset
provision. Under the health care reform legislation, individuals entitled to a credit to help
These new 1099 reporting require-
ments haven’t been repealed:
Brokers must now include the
customer’s adjusted basis when re-
porting the sales of certain securities.
Banks and other processors of
merchant payment card transactions
must report a merchant’s annual
gross payment card receipts to the
IRS and the merchant, if they’re
above certain thresholds.
The growth in third-party reporting has been
largely aimed at using third-party information
to help close the tax gap, i.e., the gap between
the revenues due to the government and the
revenues actually collected. The expansion of
1099 reporting has been a popular revenue-raiser in recent years to help address this issue. With this repeal legislation, Congress is
likely to take a closer look in the future at the
relative benefits and burdens of the revenue
to be raised compared to the additional burdens on taxpayers created.
The two repealed reporting requirements
were deemed to have flunked the benefits-vs.-burdens test. Still, the IRS feels that there
are compliance issues in both areas that the
1099 reporting was designed to help address.
The IRS may now be looking for other ways to
help improve compliance in these areas. AT