New Tax Law Changes for Form 1099 Compliance
In 2013, there have been significant tax law changes effecting freelance and contract workers who file Form 1099.
If you work with freelancers, time is running out for employers to file Form 1099 under the new tax law changes under the 2010 Health Care Act. Employers must report both goods and services earned in 2012, not just goods and exempted payments. The intended goal is to remove the distinction between goods and services paid to freelancers, thereby cutting overall compliance costs.
Compliance under the new tax law changes means there is little time to waste.
Any freelance worker that has earned an aggregate amount more than $600 in calendar year 2012 is required to file a Form 1099. This now applies to pay to non-tax-exempt corporations, such as LLC’s.
There are also increased penalties for offices that fail to meet their filing obligations. Thirty days late in providing information to the IRS or supplying a copy to the payee subjects the employer to a $30-per-payee penalty. For more than 30 days late, but before August 1, the per-payee penalty rises to $60. After August 1, the penalty jumps to $100.
The new regulations are aimed at increasing filing compliance and will affect 1099’s issued in 2013 for payments from January 1, 2012. According to the Joint Committee on Taxation, this new reporting will increase federal revenue by $17.1 billion in the next 10 years.