Payments subject to this requirement include fixed or determinable income or compensation, but do not include payments for goods or certain other payments that are subject to other specific reporting requirements, which includes all payments to corporations.

This is all going to change in 2012 when reportable payments expand to include all payments over $600 to any entity for all services and products except those made to tax-exempt corporations.  While IRS guidance is still needed to determine how the reporting process will be affected, nearly all businesses will feel the impact of this provision in some way.  If you are an S-Corporation or C-Corporation, you will begin receiving 1099s for the first time and will have to provide your Taxpayer Identification Number (TIN) to each of your customers who have purchased over $600 in goods or services from you.  If you sell products, you will receive countless additional 1099s from your customers.  Any customer that purchases goods in excess of $600 in a calendar year with you will need to provide you with a 1099.

The most important item to consider with this change is that all business owners will need to keep better records of their vendors, including obtaining information on their legal name, address and TIN.   While the 2012 tax year seems like a while off, it is important that businesses begin the process of obtaining and maintaining the information that will be required for the preparation of these forms.   It will be much easier to request and obtain this information from your vendors prior to paying them.

For questions please contact us at info@ppandco.com or 408-287-7911.

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