The
Washington examiner’s chief Congressional Correspondent issued the
following article on Saturday. This 1099 reporting seems to be getting worse
the further we go. My question is how many more mistakes are going to be made
because of these 1099’s.
First of
all the preparer of the 1099 could type in an incorrect social security number
or employer ID number. When that happens that will show up as income on
someone else’s social security number or employer ID number.
Likewise
when the 1099’s get the IRS they are going to have be typed in again and
there is more room for error.
I
don’t know if you have ever tried to deal with IRS when there is income
on file because of an incorrect filing of a 1099 or W-2, well I have and IRS
considers the filling correct unless YOU can prove it is incorrect and that is
not easy in a lot of cases.
Stay
tuned I think this requirement is going to cause a lot of problems and expense
for a lot of people.
Here is
the article in its entirety.
New law
creates IRS paperwork for rental owners
September
18, 2010
Need a plumber to fix a sink at your rental property? Get ready to
deal with the Internal Revenue Service.
A small-business bill poised to become law includes new tax
reporting requirements for rental property owners and a second provision
calling for steep increases in fines for any person or business who fails to
furnish correct information to the IRS, such as 1099 forms for services and
purchases.
The two provisions are tucked inside the Small Business Lending
Fund Act, which passed the Senate Thursday. A report issued last week by the
Joint Committee on Taxation calculates that the two provisions combined would
raise about $3 billion of the overall $30 billion cost of the legislation.
According to the bill's proposed new rules on rental property,
owners who pay $600 or more for a service such as plumbing, landscaping or
painting, would be required to issue 1099 forms to the IRS and whoever provided
the work.
"Under the provision, recipients of rental income from real
estate generally are subject to the same information reporting requirements as
taxpayers engaged in a trade or business," the JCT reported.
The new rental reporting requirements would go into effect on Dec.
31 this year and would likely affect millions of property owners, say taxpayer
advocates.
"You've got to be kidding me," said Tom Schatz,
president of the watchdog group Citizens Against Government Waste, when told
about the provision. "Honestly, it's an outrageous burden for rental
owners."
A spokesman for Sen. Mary Landrieu, D-La., who sponsored the Small
Business Lending Fund Act, would not comment on the two provisions, but said
Landrieu has introduced legislation to overhaul 1099 reporting requirements.
The higher penalties called for in the bill, which would apply not
just to rental income transactions but any person who files a 1099 form, would
take effect on Jan. 1, 2011.
Fines would double for each 1099 form someone fails to send to the
IRS, increasing to $60 for individuals and $250 for small businesses.
The maximum fine the IRS could impose overall on small businesses
for not sending in the information would double or triple, increasing to as
much as $250,000.
The increase in fines would come as tax reporting requirements are
scheduled to skyrocket under the new health care reform law.
The law includes a provision requiring small businesses to report
to the IRS via a 1099 form all transactions that cost $600 or more, which would
help bring in an estimated $17 billion in additional tax revenue.
The new reporting requirement would exempt some people, including
the military and those who receive "only minimal amounts of income"
from their rentals, but it does not specify the threshold.
Ironically, the Senate had tried to amend the small business bill
last week to reduce the 1099 reporting requirement for small businesses,
because many lawmakers believe it will be a costly administrative burden on
business owners.
But partisan fighting kept the Senate from fixing the problem and
instead lawmakers increased its scope and penalties by passing the bill with
the added 1099 requirement for rental property owners and the steeper fines.
"It does make you wonder if the senators read the bill,"
said Mike Tanner, senior fellow with the Cato Institute, a libertarian think
tank. "I would be stunned if any senator would think this would be a great
new policy. I suspect a committee staffer stuck it in the bill and nobody paid
attention to it.
