Update on IRS 1099 Reporting Requirement

Published: August 13, 2010

Many of you may have seen an email from ASAE on the IRS 1099 Reporting Requirement. NAR has been working on this issue and wanted to provide you with a legislative update.

The health care legislation enacted earlier this year included a controversial and burdensome new requirement, effective in 2012, that would require all businesses to provide IRS 1099 information returns to any vendor (and to the IRS) when the business makes payments of more than $600 to the vendor in any calendar year. This 1099 reporting provision came out of nowhere in the final days of the health care debate.

No sooner was the ink dry on the bill itself than efforts began to repeal the new 1099 rule. Many REALTOR organizations are aware that ASAE is among the groups opposing the new rule. NAR has signed on to the ASAE letter to signal its opposition to the 1099 reporting requirement.

When Congress reconvenes in mid-September, among the pending bills is a small business bill (HR 5297) that includes a modest tax title. (The bill has several non-tax provisions that NAR fully supports.) HR 5297 is expected to be brought up some time during the week of September 13.

When the Senate considers HR 5297, there will be a two-part amendment procedure related to the 1099 requirement. The first part will be an amendment that would completely repeal the 1099 requirement. That effort is expected to fail. The second will be an amendment offered by Majority Leader Reid (D-NV) and Finance Chairman Baucus (D-MT) and others. That amendment would limit the application of the 1099 reporting requirement so that only employers with more than 25 employees would be subject to the 1099 reporting requirement. Further, only payments of more than $5000 would have to be reported. That amendment is expected to pass.

While the full repeal has broad support among ASAE members and in the small business community, we would anticipate that the 25 employee threshold would mean that most local boards and many state associations would be exempt from the reporting requirement. Similarly, the 25 employees threshold should provide adequate relief for most of our members. (Real estate sales agents are independent contractors, and so would not be included as employees of their respective brokers.) The $5000 threshold for reporting will also provide substantial relief to members and to associations.

At such time as HR 5297 (with some sort of 1099 amendment) achieves final passage in the Senate, it will have to go back to the House. The House version of the bill is substantially different from the Senate version. The House will then have two choices: It may simply pass the Senate version of the bill and send it on to the President, or it may request a conference between the House and Senate to reconcile their different versions of the bill. (Note that a conference would involve at least 4 different committees, so could be a cumbersome process.) We presently have no prediction of which option the House would choose. Congress plans to adjourn for the election on October 8. A post-election lame duck session has already been announced, so this 1099 issue may remain unresolved for a few months.

Note that the IRS has made public statements that it does not have adequate capacity to process all of the 1099s that would be filed if the health care bill’s reporting requirement remains in the law as originally enacted. The IRS public statement should bolster the effort to eliminate or significantly narrow the application of the new reporting provision before it comes into effect in 2012.

Contacts: John DiBiase, 202-383-1037

Last modified: August 13, 2010 at 8:44 am | Originally published: August 13, 2010 at 8:44 am
Printed: September 24, 2020