“Critical Notice” for 1099s

published January, 2012

You may have received an email from Intuit about 1099s offering to sell you their new tool—that works with QuickBooks 2012 (billed separately!) that will allow you to exclude amounts paid to people who would otherwise receive a 1099 from you, except that they changed the rules about what you have to report. The IRS has a new Form 1099-K that reports merchant card processing of payments. If you PAID a vendor with a credit card (AmEx, Visa, M/C, PayPal), you don’t need to include the payment on a 1099. You still need to issue 1099s for payments made in other ways.

This might mean you issue fewer 1099s.

More likely, you’ll just have more work to do. Now you “get to” review the payments and you can exclude payments made via credit card, as the IRS will get the info reported to them via the credit card merchants.

Start keeping track of HOW you pay your vendors. If you never use credit cards, this doesn’t affect you. If you ONLY use credit cards, you will probably have fewer 1099s to issue. Most companies use a blend of both, so you’ll have to slice out the non-reportable transactions.

If you need help with this, let us know.

Just so you’re aware: the IRS is now asking directly if you made any payments that require a 1099. I personally think this is a way to charge a higher penalty for not doing 1099s because you were “made aware” that you should, and you are now actively saying you did (or will) issue the 1099s, so you’re extra bad if you don’t actually issue the 1099s.

For the time being, the rules of who is excluded from receiving the 1099s hasn’t changed. The 1099s are issued in a business context; your personal expenses are not reportable on 1099s. Also, corporations are excluded from having to get 1099s (LLC’s are NOT corporations, they’re partnerships and should receive 1099s). There is an exception to the exception: lawyers should receive 1099s even if they are corporations. Certain medical payments are also required to be listed on 1099s, even if the recipients are corporations.