Exec Summary - 1099 Reporting

Health Reform 1099 Reporting Requirements


Who:         Any business that pays any amount greater than $600 during the year to an individual or corporation for supplies, services or property.

When:       Section 9006 of the Patient Protect and Affordable Care Act (PPACA) states that the new 1099 reporting requirements shall apply to payments made after December 31, 2011. 


Executive Summary:  The provision, due to take effect in 2012, will require more than 30 million U.S. companies to report the value of goods and merchandise they purchase. Section 9006 of the health care bill mandates that all companies have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.


The bill makes two key cahnges. First, it expands the use of 1099s by using them to track payments not only for services but also for tangible goods. Second, it requires that 1099s be issued not just to individuals, but also to corporations.


The provision was put into the health reform bill to improve identification of unreported or hidden financial transactions.  In theory, it raises over $17 billion in federal taxes on unreported transactions.


Potential Repeal of 1099 Reporting:  The new 1099 reporting requirement of the PPACA is a mandate that most Republicans and Democrats seem to agree is an unnecessary and expensive regulatory burden on businesses. President Obama has stated a willingness to sign a bill repealing this provision.


Senate Action: On February 2, 2011 by an 81-17 vote, the Senate passed an amendment that would repeal this provision as if it had never been enacted.


House Action:  The House signaled its plan to repeal the 1099 provision by giving it a number, H.R. 4.  Typically numbers 1 through 10 on House bills are reserved for high-priority bills that are scheduled for early votes in a legislative session.


The only obstacle standing in its way is how to make up for the $17 billion or so in tax revenue that the 1099 reporting requirement was projected to generate.


Action Required:  Most employers will want to discuss the legislation and the proposed repeal with their tax accountants.   An employer is at risk for non-compliance if they do not prepare for implementation and the provision is not repealed. In order for businesses to be able to comply with the law as it currently stands, they need to start gearing up now.  They need this time to accumulate the required information from vendors and service providers and to program software or design systems to accumulate the payment information.


The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult your legal advisors to determine the laws and regulations impacting your business.