1099-MISC Changes for 2011 Tax Year

2011 was a unique year for 1099 reporting. In the early part of 2010, Congress passed a variety of laws effecting 1099 reporting.  Most of these laws have been repealed, but some of them still exist that need to be addressed for 2011 and beyond.

1099-MISC Forms need to be completed by any trade and business that pays another unincorporated business (this includes individuals, sole proprietors, partnerships and LLCs) $600 or more for services during 2011.  This has been the law for a long time and on the surface there is no real change.

In 2011, the law now requires payments made by credit card, debit card and third party payment networks like PayPal to be reported by the financial institution on Form 1099-K directly to the recipient.  This means that when you report 1099-MISC this year you need to exclude any payments made by credit card, debit card or third party payment network.  Consequently, 1099-MISC should only include payments made by check or with cash.  The $600 limit will only apply to these types of payments.  It appears as if the IRS will provide us with a lot of latitude regarding the implementation of these rules in 2011, but will start enforcing them more in 2012.

If you have any questions regarding 1099 reporting or how these new reporting standards effect you, please do not hesitate to contact us.

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