Wednesday, July 14, 2010

Prediction: Obamacare 1099 Provisions Will Lead To Identity Theft Explosion

Public Law 111-148, the Health Care Reform Act, contains a number of revenue raising provisions buried in the back of the legislation. In my judgment, the new IRS Form 1099 requirements found in Section 9006 of this law will have the unintended consequence of leading to an explosion of identity theft!

The basic changes to Form 1099 requirements incorporated in this law take effect at the beginning of 2012. They require that all businesses tabulate payments for goods and services from non-governmental agencies and send a 1099 Form to the recipient if the total exceeds $600 for the entire calendar year.

Current 1099 law exempts sending of 1099 Forms to most corporations, but the new law requires accumulating and reporting payments to corporations as well. Further, current law is largely limited to the reporting of payments for services, not goods. The new law expands coverage to all goods and services. It appears that 1099 Forms will now be required to report the same information provided on W-2 Forms that report employee compensation.

What this means for the millions of businesses in the US is that they will have to obtain confidential tax information from almost anyone who provides a good or service, even if the first transaction in a calendar year is under $600, in order to avoid paying a penalty if a 1099 Form is eventually required. Once this information is obtained, each of the businesses must follow the legal requirements for protecting this confidential information in order to avoid a penalty for violating these regulations.

1 comment:

  1. Thanks for bringing this issue to light Tracy. It is a risk that all businesses and indeviduals will have to contend with.