Small Businesses Set To Party Like It's 1099

In 2012, businesses across the country – whether small mom-and-pop shops or major corporations – will be required to file 1099 forms for goods and services that cost over $600 annually. This requirement will affect all businesses – sole proprietors, consultants, self-employed people and freelancers, who are already considered businesses for tax purposes. Reuters provides a few scary statistics, saying that based on Internal Revenue Service data, this will affect 26 million sole proprietorships, 4 million S corporations, 2 million C corporations, 3 million partnerships, 2 million farms, 1 million charities and other tax-exempt organizations, and likely more than 100,000 federal, state and local government entities. In other words, more than 38 million taxpayers and taxpaying entities will be affected. If this doesn't sound too harsh, then consider the example Reuters provides: a business that spends $20 a week on pizza for its employees would spend a total of $1,040 a year, thus requiring the business to file a 1099 form with that local pizzeria. The new tax rule (which was included with the health care bill that passed earlier this year) was fueled by lawmakers searching for ways to acquire some of the $300 billion in taxes that have gone unpaid. The Joint Committee on Taxation estimates that it will bring in $17 billion in tax revenues over 10 years. Those who fail to file every 1099 can be fined $50 per necessary form; that amount could rise to $100 is the failure is considered intentional.