irsINFORMATION REPORTING ON THE RISE

As the tax code continues to add to it’s complexity, the IRS has to make enforcement changes to keep up with the cheaters.  They can’t audit everyone, so they’ll have to rely on you and me (…and our businesses and the charities we give money to) to rat out the cheats for them.

Information Reporting for businesses, nonprofits, and potentially individuals is on the rise.  Moving into the future, information reporting, such as 1099s, will be required by those paying lump sum payments to other businesses and individuals in an ever expanding way.  Here are some ways you may see these changes take place:

1.  Investment Houses will be required to start reporting the basis details of clients’ security sales by 2010 (then the IRS will not only know what you sold the security for, they will now know what you bought it for).

2.  Credit and Debit Card Issuers will have to start reporting how much they’ve paid to merchants starting in 2011.  Example: You do business using PayPal?  Then you’ll be on their list, and the IRS will know if you’ve done more than 200 transactions and received more than $20k a year through PayPal.

3.  Businesses Making Payments to Other Corporations is on the hit list to change.  Currently, your business doesn’t need to send 1099s to other corporations that are paid more than $600 per year.  This will be changing in the near future.  There is no date set yet, but the change is coming.

4.  Landlords Paying Painters, Landscapers and Repairmen will have to start sending 1099s to their subcontractors if Obama gets his way.  He’ll be making this request soon so the IRS can make sure those subcontractors aren’t under reporting their income AND so the landlords will stop over reporting their deductions.

5.  Nonprofits Receiving Donations may have to send the IRS that information when they receive $250 or more in donations!  This is not approved yet, but this and other intense information reporting measures are sure to make the cut in the next few years.

Thanks, Jason M. Blumer, CPA

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

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