In a vote earlier this month, the U.S. Senate overwhelmingly voted to repeal the expanded 1099 information reporting requirements that were included as part of the health care reform legislation passed in 2010. Several previous attempts to repeal this provision had failed.
As part of the new federal health care law, a provision was included that required businesses (and churches) to submit a Form 1099 for every business-to-business transaction of $600 or more for payments made after December 31, 2011.
Current law requires a business to file a 1099 only when it pays more than $600 for services in a year to a person or an unincorporated entity. The new law would have expanded the information reporting requirement to include payments for services AND purchases of property from both incorporated AND unincorporated businesses. This new provision would have included services like janitorial work, as well as goods such as office supplies and raw materials. Under the provision, if your church had purchased a $1,000 computer from Wal-Mart, the church would have had to issue Wal-Mart a 1099. The provision created an absurd outcome.
The new rules were scheduled to take effect on January 1, 2012 and any purchases made after that date would have fallen under the new reporting requirements. However, the new provision has now been repealed.
With the repeal, the current 1099 reporting requirements stay in place, basically allowing employers to only use the 1099 to report various types of income other than wages, salaries, and tips to non-employees who are paid more than $600 in one year.
This repeal will save churches countless dollars from having to reprogram the way their accounting system keeps up with expenditures.