Proposed Credit Card Exemption Doesn't Allay Business Anger Over Payment Reporting Law

Proposed Credit Card Exemption Doesn't Allay Business Anger Over Payment Reporting Law

Despite an IRS and Treasury proposal to exempt payment card purchases from newly expanded Form 1099 reporting requirements, the general business community is flooding the Service with comments and calling for repeal of the entire provision.

The Patient Protection and Affordable Care Act (P.L. 111-148) amended section 6041 so that beginning in 2012 every business that pays $600 or more (aggregated over the calendar year) to an individual or non-tax-exempt corporation for goods or services must file a Form 1099-MISC with the IRS and send a copy to the payee. Under the current rules, payments for goods and payments made to corporations are exempt from this reporting requirement. The Joint Committee on Taxation estimates that the provision will raise $17 billion over 10 years.

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Requiring 40 million entities to collect taxpayer ID numbers from their product and service vendors and to track payments throughout the year by vendor to determine if they have a reporting obligation, [Giovanni] Coratolo[, vice president of small-business policy at the U.S. Chamber of Commerce] said, is "completely onerous."

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Benson S. Goldstein, senior technical manager, taxation, at the AICPA, told Tax Analysts there is a real concern whether and how the IRS will even use the extensive additional data it will receive under these new mandates. Between credit card reporting and the expanded 1099 reporting for goods and services, the IRS intends to piece together a puzzle of third-party reported sales data and match that with sales figures reported directly to the IRS by businesses to catch any underreporting. "That's going to be a huge challenge for the IRS," Goldstein said.

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View TaxAnalysts' Amy Elliott's article in its entirety on TAX.com.