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Tax News Changes to Information Return Filing Requirements

Earlier this year, Federal law expanded the filing requirements for information returns. These changes apply to payments made after December 31, 2011.

Every person engaged in a trade or business must now issue information return, Form 1099, when aggregate payments of $600 or more per calendar year are made to corporations, other than tax-exempt corporations, for specific payments. Prior law required this only for specific payments made to individuals.

Furthermore, payments of “amounts in consideration for property” and “gross proceeds” were added to the list of specific payments subject to the information reporting requirements. (Internal Revenue Code section 6041; California conforms through Revenue and Taxation Code section 18631.)

Recently the IRS sought public comments on how to effectively carry out the changes. (IRS Bulletin: 2010-29 dated July 19, 2010 Notice 2010-15.) The IRS intends to issue guidance to implement these changes to minimize the reporting burden and avoid duplicative reporting. We will follow this guidance.

We receive copies of federal information returns. When an information return has not been issued, we may deny deductions for amounts paid for personal services.

We may impose penalties for failure to correctly file required information returns.

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