The credit card exception to the 1099 filing requirement changes may ease the burden for many small businesses and non-profit organizations
The recent changes to the filing requirements for 1099 forms may turn out to be quite a hassle for many business owners beginning with payments made in 2012. Having to file a 1099 for each entity a small business or non-profit organization pays more than $600 in a calendar year has the potential to be time-consuming and confusing. Thankfully, the Internal Revenue Service (IRS) has decided to allow an exception for all payments made with credit cards. Any time a small business or non-profit organization uses a credit card to make a purchase, that transaction will NOT require a 1099 form. This exception stems from the fact that credit card companies are required to report transactions to the IRS, so there is no need for double-reporting.
For those businesses that do not already use a credit card for their purchases, now would be a great time to consider applying for one. Not only will all transactions made with a credit card be exempt from 1099 reporting, credit cards are also great tools for organization. It is much easier to keep accurate business records when you have an itemized credit card bill that shows exactly what you spent and where you spent it. Obviously, there are some purchases that cannot be made using a credit card. For those transactions, businesses will need to be sure and obtain the Tax Identification Number (TIN) for the person or company they are paying.
In addition, if you're a business owner and you don't already accept credit cards, now might be a good time to start. Your customers may thank you at tax time!
While these changes do not take effect until January 2012, it is still crucial that small businesses and non-profit organizations begin thinking about these new changes. Hopefully, the exception for credit cards will lighten the load for many businesses and make compliance easier and less time-consuming.
**Please note this entry has been amended to reflect that the changes to the 1099 form filing requirements take effect in 2012 for 1099 forms issued in 2013.**