You’ve just been freed from one of the most potentially crushing reporting requirements ever to loom over Finance departments.
The best part? It was over before it began.
A year after its passage as part of 2010’s Patient Protection and Affordable Care Act, the expanded 1099 reporting requirements are nothing more than a close call.
Yesterday, President Obama signed The Small Business Paperwork Mandate Elimination Act of 2011. That’s after multiple failed attempts to put an end to the administrative nightmare.
So pop the champagne, do a little victory dance — now your company won’t have to track and report payments to every vendor it pays more than $600 to in a year, incorporated or not, for goods or services.
Nor will you have to wrestle taxpayer or employer ID numbers from uncooperative vendors or add another task to your already-crushing year-end to-do list.
Stakes still raised for mistakes
After some understandable celebration make sure all your finance staffers remember: This is not the time to take your eye off compliance.
True, your organization has been spared a mammoth new paperwork headache. But with the revenue the feds lost by killing this requirement (the stumbling block that got previous attempts at repeal to fall flat), you’d better believe they’ll expect the 1099s you do file to be beyond reproach.
How they’ll do it: stiffer penalties. Much stiffer.
The Small Business Jobs Act dramatically increased the penalties imposed on companies for 1099 errors. Starting with all information returns due after Jan. 1, 2011, the price your company will pay doubles to:
- $30 per return for “first-tier penalties” (ones your company corrects within 30 days of Jan. 31)
- $60 per return for second-tier penalties (corrected or initial filing prior to Aug. 1), and
- $100 per return for third-tier penalties (any change after Aug. 1).
And those penalties can add up – even faster now without relief. Penalties now max out at $250,000, $500,000 and $1,500,000 per year, respectively.
Info: For the full text of The Small Business Paperwork Mandate Elimination Act of 2011, click: