1099

Beginning January 1, 2012, payments to all vendors over $600 will have to be reported to the IRS on Form 1099.  For instance, a business will be required to send a 1099 to their office supply store for office supplies purchased throughout the year.  This is a drastic change from the current rules that require 1099’s generally be sent for services and various other payments only for non-incorporated vendors.

Without appropriate planning and preparation, this requirement could prove extremely challenging and costly to your business.  You will now be required to obtain federal identification numbers and addresses, as well as track payments, from all venders no matter the size or service/product purchased there.

 If you use accounting software to maintain your company’s books, check now to ensure it will be able to track and report the information.  If records are kept manually, you should consider whether your recordkeeping will be sufficient for this new requirement and make changes as needed.  It is not too early to start reviewing, updating, and correcting vendor information so that you are ready come 2012.

 If you have any questions regarding this new legislation and its requirements, please contact one of our tax professionals.