Currently, small businesses have to complete the IRS Form 1099 only if they pay $600 or more in a given year to an independent contractor. But the new law will require businesses to issue 1099s to all vendors of services or property that received payments of $600 or more a year.

 

A survey conducted by the National Association for the Self-Employed found business owners expect a 1,250% increase in the amount of their tax paperwork in order to comply with the IRS requirement, from an average of less than four 1099s to more than 26.

 

In addition to filing many more 1099s, businesses will have to obtain accurate Taxpayer Identification Numbers from all vendors. If they can’t, the business owner will be required to withhold a portion of the vendor’s payment and send it to the IRS. This procedure is expected to add to the administrative workload of business owners, or force them to hire an accountant, thus increasing their costs.

-Noel Brinkerhoff

 

New Law Increases Paperwork for Self-Employed Over A Thousand Percent (National Association for the Self-Employed)

Increased Tax Regulation on Small Business (May 2010) (National Association for the Self-Employed)