1099 Provisions Repealed

Congress repealed a widely criticized expansion of Form 1099 information reporting that would have applied to most payments by businesses and a similar requirement for recipients of real estate rental income. The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4) passed the Senate in early April after having passed the House the previous month and was signed by President Barack Obama on April 14. It undid a revenue-raising provision of the Patient Protection and Affordable Care Act (PL 111-148) that, starting with payments in 2012, would have expanded the reporting requirements of IRC § 6041 to include most payments by businesses totaling $600 or more in a calendar year to any single payee, including corporations (see “The Coming 1099 Revolution: Are You and Your Clients Ready?JofA, Aug. 2010, page 40). It also repealed a similar provision of the Small Business Jobs Act (PL 111-240) that would have required individuals who receive rental income to issue Forms 1099 to each service provider to whom they made payments totaling $600 or more during a calendar year, beginning with 2011. The AICPA was among many groups and individuals urging repeal of both provisions as unduly burdensome to taxpayers, especially small businesses.


To replace projected revenues from the provisions, the repeal act increased the level of recapture of an excess advance health care premium assistance credit under section 36B.


The repeal act, however, did not roll back the Small Business Jobs Act’s increase in penalties for failing to file 1099s and other information returns and to provide copies to payees. Effective with information returns required to be filed on or after Jan. 1, 2011, the section 6721 penalty per return is still doubled from $50 previously to $100, and the maximum penalty per person required to file returns increased from $250,000 to $1.5 million. Lower penalties for failures that are corrected within specified periods are also higher than previously. The penalty for failing to provide a correct statement to the payee under section 6722 is increased correspondingly.


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