1099 form  reporting rules enacted as part of healthcare reform:

Section 6041 of the Internal Revenue Code outlines 1099 reporting requirements:    The Patient Protection and Affordable Care Act includes an Amendment to Section 6041 which now requires 1099 reporting for any payments aggregating $600 or more to a supplier per year.

For the year of 2011, 1099 reporting changes are required of recipients of rental income from real estate:

The act subjects recipients of rental income from real estate to the same information-reporting requirements as taxpayers engaged in a trade or business. Thus, rental income recipients making payments of $600 or more to a service provider in the course of earning rental income are required to provide an information return (typically, Form 1099-MISC, Miscellaneous Income) to the IRS and to the service provider. This provision will apply to payments made after Dec. 31, 2010, by individuals and entities in the course of earning rental income and will cover, for example, payments made to plumbers, painters or accountants.

For the year of 2012,  1099 reporting changes are expanded even more:

For payments made after December 31, 2011, the new amendment will now create reporting requirements for all for-profit entities (excluding tax-exempt corporations) for payments made for Property (goods, merchandise, supplies, raw materials, equipment, etc.) over $600.  Companies will be required to submit accurate TIN information or face monetary penalties which are substantially increased under the new law.

Old Law: Most payments to businesses were exempt from Form 1099 reporting requirements. These exemptions included: Providers of Goods, Corporations, Tax Exempt Organizations, Internal Organizations, and Retirement Plans. 1099’s were only required for a small subset of the suppliers since they were generally only due to nonincorporated service providers where payments were made. This was typically well less than 10% of suppliers.

New Law: Companies will be required to submit 1099’s on all for-profit companies who receive payments greater than $600. This will typically be 90+% of suppliers. Note that when payments are made via debit or credit card, no reporting is required. 

Since the new law becomes effective for all payments made after December 31, 2011, companies should plan to start collecting and validating Form W-9 ’s and TIN’s for each supplier they will spend more than $600 with for the 2012 year. Companies will need to issue and submit 1099’s to suppliers and IRS early in 2013 for the year 2012.

It is still unclear what the newly elected Congress will do regarding these new reporting rules. There has been much discussion of repealing these new requirements.  But for now, the new reporting rules stand.  Note that entities using QuickBooks accounting software can turn on 1099 tracking functions that will greatly ease accumulating data for 1099 reporting.

Just prior to the end of 2010, Congress passed extensions to the Bush tax credits.  The bill was called:

Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853).

Individual tax provisions:

• Alternative Minimum Tax (AMT) patch (individual AMT exemption amount for taxable years beginning in 2010 is (1) $72,450 ($74,450 in 2011), for joint returns and surviving spouses; (2) $47,450 ($48,450 for 2011) for unmarried individuals; and (3) $36,225 ($37,225 for 2011) for married individuals filing separate returns; allows an individual to offset the entire regular tax liability and alternative minimum tax liability by the nonrefundable personal credits for 2010 and 2011).

• A new estate tax rate and exemption amount for 2011 and 2012. The exemption amount is set at $5 million per person ($10 million per couple) and a maximum 35% tax rate is in effect.

• For 2011 only, a reduction of the Social Security (OASDI) tax rate on employees to 4.2% (from 6.2%) and reduction of the self-employment tax (SECA) rate to 10.4% (from 12.4%).

•Extension of Charitable IRA Distributions from individual retirement accounts. (IRA) distribution provisions of the Pension Protection Act of 2006 have been renewed. This was the bill that allowed eligible IRA owners to make qualified charitable distributions of up to $100,000 ($200,000 for married couples who each qualify separately) per year from traditional IRAs.  For 2010 and 2011 these distributions may be made by taxpayers with the distribution being excluded from income, thus reducing adjusted gross income.  These distributions are not tax-deductible as a charitable donation and must be made payable directly to a qualified charity. The benefit of these types of distributions are that adjusted gross income is kept lower than if you were taxed on the distribution and subsequently took a charitable deduction for the donation.  If you make your distribution by January 31, 2011, you may qualify to include it as a 2010 distribution. 

Additional extensions through 2012 include:

• Extension of the 10%, 15%, 25%, 28%, 33% and 35% individual income tax rates.

• Extension of the tax rates for qualified dividend income and capital gain (0% and 15%).

• Extension of the $1,000 child tax credit and allowance of the credit against regular income tax and AMT and the earned income formula for determining the refundable child credit, with the earned income threshold of $3,000.

• Extension of marriage penalty tax relief (the basic standard deduction for a married couple filing a joint return remaining twice the basic standard deduction for an unmarried individual filing a single return and increase in the size of the 15% regular income tax rate bracket for a married couple filing a joint return to twice the 15% regular income tax rate bracket for an unmarried individual filing a single return).

• Extension of education provisions (the NHSC Scholarship Program and the Armed Forces Scholarship Program scholarship exclusion, the exclusion from income and wages for employer-provided educational assistance, above-the-line qualified tuition expense deduction, the student loan interest deduction, and Coverdell education savings accounts).

• Extension of deduction for State and local general sales taxes in lieu of State and local income taxes for taxpayers who itemize their deductions.

Business Provisions:

• Extension of bonus depreciation (and creation of 100% bonus depreciation for assets placed in service after September 8, 2010, and before 2012) and Section 179 expensing amounts;

• Extension of business incentives, including: the research and development credit; 15-year depreciation for leasehold, restaurant and retail improvements; 7-year depreciation for motorsports entertainment complexes; special expensing for film and television costs.

• Extension of special energy incentives including: the new energy efficient home credit; incentives for biodiesel and renewable diesel; suspension of the limitation on percentage depletion for oil and gas from marginal wells; and grants for specified energy property in lieu of tax credits under Section 1603 of the American Reinvestment and Recovery Act of 2009.

• Extension of incentives that help improve conditions in the District of Columbia, New York City and the Gulf region.

• Extension of corporate charity deductions for donations of food inventory, computer equipment and books.

Patient Protection and Affordable Care Act of 2010:

• Credit for Employee Health Insurance Expenses of Small Business — Beginning in 2010, eligible small businesses can receive a nonrefundable tax credit of up to 35% (25% for tax-exempt small employers) of the total premium cost of providing health care to their workers.

• Qualifying Therapeutic Discovery Project Credit — Taxpayers are eligible for a 50% nonrefundable investment tax credit for qualified investments in “qualifying therapeutic discovery projects.”

• Trade or Business Expenses — Effective March 30, 2010, self-employed taxpayers can deduct amounts paid during the taxable year for medical insurance covering the taxpayer, the taxpayer's spouse, dependents, and children under age 27.

Changes impacting individuals include:

• Expansion of Adoption Credit and Adoption Assistance Programs — Effective for taxable years beginning after 2009, the adoption credit and adoption assistance programs are expanded by increasing the maximum amount of adoption expenditures that may be claimed as a credit to $13,170, including a child with special needs. Other changes apply as well.

• Amounts Received Under Accident and Health Plans — Effective March 30, 2010, you are no longer required to include in your income employer-provided accident or health plan reimbursements for medical care expenses paid on behalf of your child up to the age of 27, a big change from the current age of 19 or 24 if the child is a full time student.

Health Care Reform Provision Phase Ins:

Effective 2010:

• Credit for small employers (no more than 25 employees) for health insurance expenses.

Effective March 23, 2010:

• Employers with more than 200 full-time employees and that have one or more health plans must automatically enroll new full-time employees in one of the offered plans. Notice and opportunity to opt out must be provided. Note: This effective date is not clear. The provision may not be effective until guidance is issued.

• The Fair Labor Standards Act is amended to protect whistleblowers and other employees receiving health care subsidies.

Effective March 30, 2010:

• Self-employed individuals may deduct health insurance premiums paid on behalf of children under age 27.

• Dependent coverage is extended to a child of a member of a voluntary employees' beneficiary association (commonly referred to as a VEBA) who is less than age 27 as of the end of the calendar year.

• Qualified retirement plans may pay health benefits for a retiree's child under age 27.

Effective June 20, 2010:

• Employer health plans providing coverage to early retirees have access to reinsurance. Program terminates January 1, 2014.

Effective September 23, 2010:

• Insurers and group health plans that offer dependent coverage are required to allow uninsured children to remain on their parents' health insurance through age 25.

• Small and large group market plans are prohibited from imposing lifetime limits on coverage.

• Plans must provide coverage, without cost-sharing, for preventive services and immunizations.

• Insurance companies are prohibited from rescinding coverage, except in cases of fraud or intentional misrepresentation of material fact.

• No discrimination based on the wages of employees.

• All health insurance plans are prohibited from excluding children under age 19 on the basis of a pre-existing condition.

Effective 2011:

• Employers must report on Form W-2 the cost of employer-sponsored health insurance.

• Health flexible spending accounts, health reimbursement arrangements, health savings accounts (HSAs) and Archer medical savings accounts (MSAs) may reimburse for medications that are prescribed drugs or insulin only (no over-the-counter medications).

• The tax on distributions from an HSA or Archer MSA that are not used for qualified medical expenses is raised to 20%.

• Small employers (average of 100 or fewer employees in either of two preceding years) may establish “simple cafeteria plans.”

Small Business Jobs Act:

• In-Plan Roth Rollovers. This provision, which took effect September 27, 2010, allows plan participants in elective deferral plans to rollover their pre-tax account balances to Roth-designated accounts within an employer-sponsored plan instead of migrating to Roth IRAs with brokers, mutual fund companies, banks, etc. The new rule applies to specific participants in specific plans, and plans must contain a qualified designated Roth contribution program that allows rollovers from eligible distributions.

• Partial Annuitization of Certain Annuity Contracts. This provision, which takes effect beginning in 2011, simplifies the process for nonqualified deferred annuity owners to annuitize a portion of their annuity contract while allowing the remaining amount to grow tax-deferred.

• Roth Contribution Accounts in Governmental Deferred Compensation Plans. Beginning after December 31, 2010, eligible deferred compensation plans maintained by a state or an agency, instrumentality, or political subdivision of a state may include Roth contribution programs under which participants may elect to make contributions to designated Roth accounts. All contributions would be included in a participant's taxable income when made, but if certain conditions are met, distributions from their Roth accounts would be tax-free. For consideration as a qualified Roth contribution program, an employer-sponsored plan must meet specific criteria.

·   Cell phones removed from the definition of “listed property,”

·   Extended the additional 50% first-year bonus depreciation deduction into 2010,

·   Adjusted the 2015 estimated tax payment by corporations with at least $1 billion in assets, the new provisions also include the following changes:

• Temporary Exclusion of 100% of Gain on Qualified Small Business Stock. For stock purchased between September 27, 2010, and January 1, 2011, only, all gain, not the usual 50%-75% of gain, from the sale of qualified small business stock is excluded and all regular tax and alternate minimum tax is waived for those who hold that stock for at least five years.

• Business Credit Carrybacks. For a business's first tax year beginning in 2010, eligible small businesses can carryback excess general-business credits for five years instead of one, providing eligible businesses with a much-needed tax break. This credit may offset both regular and alternative minimum tax liability.

• Additional §179 Expensing. Provisions in the new Act increase both the amount taxpayers are allowed to deduct in the year a depreciable asset is placed in service—from $250,000 to $500,000 for 2010 and 2011—and increases the phase-out threshold amount from $800,000 to $2 million for those same years.

• Additional $5,000 for Start-Up Expenditures. Beginning in 2010, taxpayers can elect to deduct up to $10,000 in trade or business expenses incurred before a business began. This provision also increases the deduction phase-out threshold from $50,000 to $60,000.

• Temporary Reduction in Recognition Period for S Corporation Built-In Gains Tax. The new Act shortens a corporation's recognition period from 10 or seven years to five years for taxable years beginning in 2011.

Foreign Account Tax Compliance Act (FATCA) (which was part of a larger jobs bill)

• Mandatory Withholding on Foreign Accounts

• Repeal of Foreign Exceptions to Registered Bond Requirement

• Disclosure of Foreign Financial Accounts

• Penalties for Failure to Disclose Foreign Accounts

• Extended Statute of Limitations for Undisclosed Foreign Accounts

• Increased PFIC Reporting

• Electronic Reporting Requirements

• Foreign Trust Enforcement

• Taxation of Dividend Equivalents

State of Oregon Update:

The State of Oregon has yet to commence responding to the updated federal law.  Currently, 2010 tax forms have not been finalized and there is talk that the forms may not be ready until after the filing deadline.  In the meantime, Oregon returns may need to be extended until laws are enacted to respond to new federal rules.