Expanded Information Reporting Requirements

One of the most controversial revenue raisers of the Patient Protection and Affordable Care Act of 2010 is the expansion of information reporting requirements for businesses. Under the new law, any time a business pays $600 or more in aggregated payments to an individual or business during a tax year, an information reporting document must be filed with the IRS.

The current rules, in effect through the end of 2011, require businesses to report amounts of $600 or more paid for services. The new law, which applies to payments made during the 2012 tax year and beyond, expands the requirement to include payments made for goods and property. In addition, the new law requires reporting for payments made to corporations, most of which are currently exempt from the requirement. Although the law does not exempt payments made by credit and debit cards currently, the IRS is expected to exempt payments made with credit and debit cards, since they are already covered under the reporting rules for payment card processors. 

Efforts to repeal the provision have, so far, been unsuccessful, though business and trade groups argue that the expansion of the reporting requirements creates “a tremendous paperwork compliance burden.” Legislation to repeal the new requirements has been considered and rejected by Congress. 

In September, elected officials expanded the reporting requirements even further to include payments made by rental property owners. The new provision for landlords was introduced to offset tax breaks added by the Small Business Jobs Act of 2010. Under the new rules, owners of rental property who receive more than a minimal amount of rental income are required to report to the IRS payments made to service providers after December 31, 2010.  The new requirement applies to payments made for rental expenses of $600 or more in aggregated payments to an individual or business during a tax year. Exceptions apply for members of the military and the intelligence community who rent out their main home on a temporary basis.

Payers must collect the names, addresses, and taxpayer identification numbers of payees. Generally, the best way to collect this information is to request a completed IRS Form W-9.

If you have any questions about IRS reporting requirements, consider becoming a TaxResources Member and using our professionally staffed TaxHotline Service. Our TaxHotline professionals will answer your tax questions in a prompt, accurate, and confidential manner.

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This information is being provided to the taxpayer as required by the Internal Revenue Service and follows the guidelines for best practices for tax advisors per Circular 230 §10.33(a)(1-4), and §10.35(b)(2), (8), and (10). This written statement may be considered to be a “covered opinion” as defined by the Internal Revenue Service. This statement(s), along with subsequent correspondence, is not intended or written to be used, and cannot be used by the taxpayer, for the purpose of avoiding lawful penalties that may be imposed on the taxpayer by the Internal Revenue Service. The principal purpose of any stated tax advice included here has as its purpose to claim tax benefits in a manner consistent with the statutes and Congressional intent.