REPEAL OF THE NEW 1099 RULES NOT ADDRESSED IN THE NEW TAX ACT

We were all hoping that the Congress would see fit to repeal the new onerous 1099 rules that were part of the Health Care Bill. But no luck.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 did not include a provision to repeal the 1099 rules that were adopted earlier in the year by Congress. For unspecified reasons, the repeal of the 1099 provisions were not included in the legislation and no amendments to the original legislation were adopted. As a result, it will likely be the earlier part of the next session of Congress before this issue will again be addressed.

Our concern is that (1) keeping records to track expenses by provider, (2) obtaining tax identification numbers and other information from providers of property and services, and (3) providing Forms 1099-MISC during January, a month when taxpayers would not normally be focused on tax issues, would be extremely burdensome.

As I am sure that you know, the provision in the Patient Protection Act that expands information reporting requirements to business payments for property from corporations and the provisions in the Small Business Jobs Act of 2010 that expands the information reporting requirements to payments for rental property expenses, both add to these critical administrative burdens. The new requirements applicable to rental property expense payments will take effect in 2011. Note, this would be the first time that individual taxpayers owning rental property who are not "engaged in a trade or business," would be required to provide Forms 1099-MISC. For example, many individuals, who own a vacation property that is rented part of the year to help defray their costs, may be subject to the reporting provisions.

I thought that this might be a good place to show you what the legislation looked like in the Health Care Bill. See if you can read it.

INFORMATION RETURNS. The Patient Protection
and Affordable Care Act, Pub. L. No. 111-148, extended
information reporting beginning in 2012. Section 9006 of Public
Law 111-148 entitled, “Expansion of Information Reporting
Requirements” amends I.R.C. § 6041(a) and adds I.R.C. §§
6041(h) and 6041(i), all effective for payments made after
December 31, 2011. Section 2101 of the Small Business Jobs
Act of 2010, Pub. L. No. 111-240, added I.R.C. § 6041(h) to
provide:
“Solely for purposes of subsection (a) and except as
provided in paragraph (2), a person receiving rental income
from real estate shall be considered to be engaged in a trade
or business of renting property.”
Effective for taxable years beginning after December 31, 2010.
Pub. L. No. 111-240. Exceptions are provided for members of
the military and for hardship and minimal amounts as set by
regulations.