By Joyce M. Rosenberg, AP Business Writer
NEW YORK (AP) — Tucked away in the health care overhaul bill that became law this year was a provision that will require small business owners to keep better records of what they buy. They'll also have to report some purchases to the government.
This new law requires small businesses to issue 1099 forms to people or companies that sell them more than $600 worth of goods or services. It takes the 1099 beyond its most common business use, which is to report money paid to independent contractors or freelancers.
The law doesn't take effect until Jan. 1, 2012, which means owners won't have to worry about the paperwork until early 2013, when they're compiling their 2012 returns. But owners whose books and finances are chaotic might want to get themselves organized in the meantime so keeping track of such payments and reporting them becomes routine.
THE NEW LAW
The law, called a revenue provision, was attached to the health care legislation that Congress passed and President Barack Obama signed into law in March. According to Congress' Joint Committee on Taxation, under the new law a business is required to file a 1099 form "for all payments aggregating $600 or more in a calendar year to a single payee."
Between now and the Jan. 1, 2012 effective date for the law, the IRS will be formulating regulations that spell out what businesses must do under the law. Eric Smith, a spokesman for the agency, said that as with any regulations, the public will be able to comment on those regulations before they also take effect.
Because the regulations don't yet exist, it's hard to predict exactly what businesses will have to do to comply.