IRS Invites Commentary on New Payment Reporting Rules

IRS Notice 2010-51, issued on July 1, 2010 has already attracted the attention of CPAs and taxpayers alike – with many calling for repeal.

Arising from the Patient Protection and Affordable Care Act of 2010, the proposed amendments to Section 6041 of the Internal Revenue Code include the expansion of existing reporting requirements of those persons engaged in a trade or business who make payments in that trade or business in excess of $600. In other words, the IRS will now require businesses to file Form 1099-Misc (Miscellaneous Income) or Form W-2 (Wage and Tax Statement) for payments that aggregate over $600 per year to each payee (including vendors and contractors).

Information reporting will now be expanded to include payments of amounts in consideration for property and gross proceeds, in addition to payments made by corporations. In the past, corporations were included in those organizations exempt from reporting payments in this manner. Under the new amendment, exempt organizations are strictly those which are exempt from tax under Section 501(a) of the Code (traditionally charitable or non-profit organizations).

The proposed amendments exclude payments of most interest, dividends, royalties, and securities and broker transactions. Purchases made by credit card will also be exempt since they are already reported by bank statements and other credit companies.

The proposed amendments are expected to be finalized this fall, and the Treasury Department and the Internal Revenue Service invite public commentary in order to create appropriate guidance for implementation of the new information reporting requirements. Issues requested to be commented on include, but are not limited to:

• Minimization of the burden of the new reporting requirements (including any potential changes needed to the existing practices for filing Form 1099)
• Avoidance of duplicative reporting
• The appropriate scope of the terms “gross proceeds” and “amounts in consideration for property”
• Potential changes to Form W-9 (Request for Taxpayer Identification Number and Certification) regarding payees and backup withholding

Comments are requested to be sent no later than September 29, 2010 and may be submitted in the following manner:

• Via email to [email protected] – Remember to include “Notice 2010-51” in the subject line.
• Via post mail to Internal Revenue Service, CC:PA:LPD:PR (Notice 2010-51), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
• Hand Delivery will be accepted between the hours of 8:00 a.m. and 4:00 p.m. Monday to Friday to CC:PA:LPD:PR (Notice 2010-51), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, D.C.

All comments are available for public inspection and copying.

There are so many factors for taxpayers to consider in tax planning for the new information reporting requirements. Since the IRS has not yet issued guidance, please contact your MarcumRachlin Tax Professional to see how these changes may affect you.