Small Business Jobs Act of 2010 – 1099 Reporting Requirements

The Small Business Jobs Act of 2010 created a controversial amendment to I.R.C. Section 6041 that required greater Form 1099 reporting requirements for anyone engaged in a trade or business. The Small Business Jobs Act of 2010 amended the section so that beginning in 2012, payments to non-tax-exempt corporations, which had previously been exempt from the reporting requirements, would be subject to information reporting. Additionally, for payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide an information return to the service provider and IRS.

Recent Repeal
On April 14, 2011, President Obama signed The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, which specifically repeals:
• the requirement for businesses, charities, and governmental entities to report payments to companies for merchandise purchased in the aggregate of $600 or more (originally effective for 2012),
• the requirement for rental property owners to report expense payments in the aggregate of $600 or more (originally effective for 2011), and
• the requirement for businesses, charities, governmental entities, and rental property owners to report payments for services and merchandise to corporations (other than attorneys and certain health care providers) in the aggregate of $600 or more (originally effective for 2012).

The repeals under the new law are retroactive, thus reinstating the status quo for Form 1099 reporting as established prior to enactment of the 2010 Small Business Jobs Act.

If you have further questions on the Act please do not hesitate to contact us.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.