A question was recently posed in a business journal magazine asking, should the IRS require business owners to submit 1099 forms for every purchase of more than $600? Why or why not?
Every time the IRS makes changes to 1099 or payroll tax reporting, it results in U.S. companies incurring a tremendous amount of additional costs in software upgrades and business process re-engineering. Even when these changes are meant to provide a financial incentive for companies (the Hire Act as an example) a lot of time and money is spent on implementing these changes. As a technology business consulting company, we incur additional client revenue as result of these changes, but I would much rather see our clients spending their technology dollars on gaining efficiencies in their business, creating exciting new products, or providing better service to their customers. Microsoft Dynamics™ GP 2010 is now available and offers robust functionality, advanced reporting, built-in workflows, and integrations to Microsoft Office, Microsoft Dynamics CRM, and Microsoft SharePoint.
Expanding the criteria for 1099 reporting is meant to increase tax revenues. However, the cost for the IRS to ensure the compliance with the new reporting requirements and to produce the data analysis needed to take advantage of this additional 1099 information will be high. So unless a thorough analysis of the cost/benefit for the increase in tax revenues has been completed and the impact on U.S. companies has been taken into consideration, I would vote no to the IRS requiring business owners to submit 1099 forms for every purchase of more than $600.
By: Pat Smith, RSM McGladrey, Inc. –