Self-employed real estate practitioners should expect a host of new paperwork beginning in 2012.
That will be the first year that whenever a firm buys more than $600 a year in goods or services from a vendor – whether it is a giant company or a one-person show – the vendor will be due a 1099 from the purchaser at the end of the year.
Lawmakers passed the provision to help fund healthcare changes by closing the “tax gap” created by cheaters. An estimated $300 billion of revenue is lost to tax evasion every year.
Critics say the new rules expand current reporting requirements significantly, with the burden falling on sole proprietors and other very small businesses. The new rules require tracking payments throughout the year to see if they fall into the over-$600 category.
If the vendor fails to supply his or her tax ID number, then the payer is required to withhold 28 percent of the payment and send that amount to the IRS.
There is a way around this. Businesses that pay with credit or debit cards are excused from sending 1099s.
Source: The Wall Street Journal, Laura Saunders (07/17/2010)