On Tuesday the Senate passed the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011,” which repeals expanded taxpayer reporting requirements under the Patient Protection and Affordable Care Act and the Small Business Jobs Act of 2010. If signed into law by President Obama, taxpayers will not have to report payments of $600 or more to corporations and/or for the purchase of property, and rental property owners who are not “engaged in a trade or business” and who make annual purchases from a vendor worth $600 or more will not have to issue 1099 forms. 

The repeal bill was passed in response to two pieces of legislation enacted in 2010 that significantly expanded information-reporting requirements for businesses and for taxpayers who receive rental income. The Patient Protection and Affordable Care Act expanded the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation), and to include payments made for property, starting with payments in 2012. The Small Business Jobs Act enacted a requirement that individuals who receive rental income must issue Forms 1099 to service providers for payments of $600 or more made during 2011 and for payments made for property and to corporations beginning in 2012. Both of these provisions are repealed by the bill.

Both of the 1099 reporting requirements were intended to raise revenue. To pay for repeal, the bill will increase the amount of the new IRC § 36B health care premium assistance credit that is subject to recapture. Under this amendment, taxpayers whose household income is over 400% of the poverty line for a particular tax year would have to pay back their advance health care premium assistance credit payments (previously this provision applied to taxpayers whose household income was over 500% of the poverty line). For taxpayers whose household income is less than 400% of the poverty line for a particular tax year, the amount of the increase in tax due to excess advance payments of the credit will be limited to the applicable dollar amounts in this table:

 

If the household income (expressed as a percent of poverty line) is:             The applicable dollar amount is:

Less than 200%                                                                                                                                   $600

At least 200% but less than 300%                                                                                                    $1,500

At least 300% but less than 400%                                                                                                    $2,500

 

If you have any questions regarding this information, please contact our office at (239) 433-5554.  Our team of professionals welcomes the opportunity to discuss your specific situation further. You may also visit us on the web at www.markham-norton.com.