On April 14, 2011, the President signed H.R. 4, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011. This new law retroactively repeals unpopular Form 1099 information reporting rules added by 2010 legislation.
Code Section 6041 requires all persons engaged in a trade or business making certain payments of $600 or more in the course of such trade or business to report those payments to the IRS on Form 1099-MISC. Before the 2010 legislation, the payments that most commonly triggered the reporting requirement were payments for services. There were a number of exemptions from Section 6041’s reporting requirements under prior law. For example, payments to corporations were exempt under Reg. §1.6041-3(p)(1).
Changes Made by 2010 Legislation
Beginning in 2012, Section 9006 of the Patient Protection and Affordable Care Act (PPACA) added payments of amounts in consideration for any type of property and gross proceeds — for example, it added payments for goods or other property — to the list of payments subject to information reporting. Section 9006 of PPACA further provided that, beginning in 2012, payments to non-tax-exempt corporations, which had previously been exempt from the reporting requirement, would be subject to information reporting. Additionally, for payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide an information return to the service provider and IRS.
For payments made after December 31, 2011, the Act repeals the provisions in Section 9006 that impose a reporting requirement for payments to corporations and payments for goods or other property. Moreover, for payments made after December 31, 2010, the Act repeals application of the information reporting requirements to recipients of rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting property. The result is that the information reporting rules revert to the way they read before enactment of PPACA and the Small Business Jobs Act of 2010.