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New 1099 Reporting Requirements Still Stand
As reported by the Washington Examiner (http://tinyurl.com/24srh9n) 2 bills were defeated in the U.S. Senate which would have either repealed completely or amended the reporting requirements beginning in 2012. What does this mean for businesses in the near future? More and more paperwork. Penalties are normally $50.00 for failure to issue 1099's, however intentional failure can be $100.00 or more, depending upon the circumstances. Below are the basics of what to expect:
1. Every vendor you pay over $600.00 to in a calendar year, regardless if they are a sole proprietor or a corporation, requires the issuance of a 1099. Therefore you will need to collect a W-9 form (http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3) for each vendor you pay, which it's advisable to collect up front before December 31st, when you're focusing on closing out your books and getting ready to issue W-2s. However corporations that are tax exempt are not required to receive these forms.
2. Your business customers are going to have to be requesting W-9 forms from you, so an avenue of consideration is submitting your forms directly sooner rather than later, to avoid the massive onslaught of paperwork you may receive. Should you fail to submit accurate W-9 forms, they can withhold up to 28% of your payment. In the event this should occur, track the information and amounts when it's time to file your taxes.
Although this will not take place for payments made until after 1/1/2012, it's strongly recommended that you examine your accounting procedures, develop a W-9 implementation procedure, and adapt as you would with any other changes.