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Reporting Requirement Creates New Burdens
Welcome to the first tax post on our new Mobility LawBlog. In these posts, I'll try to provide real time updates on tax happenings of possible interest to those of us in the Mobility business, and shed some light on what might occur in the future. Any opinions expressed are only my own, and I welcome any comments or feedback.
Today's tax quote: "My company fills out 39,000 tax forms a year; that's one every three and a half minutes." Michael Armstrong (AT&T)(several years ago).
Unfortunately, with the pending expansion of the requirement to file Forms 1099 that was enacted as a part of Health Care Reform earlier this year, Mr. Armstrong's number is likely to be exponentially expanded. Belatedly recognizing this fact, and listening to complaints from accross the entire business community that the extra burden of collecting more taxpayer ID numbers and tracking thousands of additional payments will be overwhelming, efforts are underway in Congress and the Administration to mitigate or eliminate the problems.
By way of background, prior to the new law (which goes into effect in 2012), Forms 1099 were required for payments during the year aggregating $600 or more to individuals, but not to corporations, and only for items of income, not for payments for goods or property. The new law eliminates the exemption for payments to corporations, and also expands reporting to include payments for "property" and other "gross proceeds." The potential expansion of required reports, as has been pointed out by unhappy organizations as diverse as the American Institute of Certified Public Accountants, the Chamber of Commerce, and various small business organizations, is very large. This problem is exacerbated by the fact that the $600 reporting threshold in not indexed for inflation, and has not changed since 1954. As the Congressional Research Service recently pointed out, the personal exemption was also $600 in 1954, is indexed for inflation, and had increased to $3,650 by 2010.
For companies involved with relocation, there are myriad questions posed by these new requirements. For example, if a company makes payments to its relocation management company to reimburse the RMC for payments made to transferees, are those payments now subject to reporting? Are payments the RMC makes to a bank or financial institution for the transferee's mortgage subject to reporting. Or suppose the RMC reimburses a broker for maintenance and repairs on an inventory home? Or the RMC pays an invoice from a printing company for brochures and other marketing materials? Or a company pays moving and storage company invoices on behalf of transferees? The list of potential new reporting requirements is very long. And the problem is complicated by the fact that companies must now decide whether to obtain tax ID numbers on Form W-9 from a greatly expanded list of persons or entities with whom they do business, and revise their entire tracking system for all payments so as to be able to identify the additional reportable payments.
IRS was given authority in the new law to write regulations to minimize burdens such as duplicative reporting, and the IRS, to its credit, has moved promptly. It has already announced that it will not require reporting for payments made with payment cards (credit or debit cards), since those payments are already reported by the payment processors under section 6050W and regulations that go into effect in 2011. And it has requested (and received) comments on other ameliorating rules it could provide for other duplicative payments (which might include, for example, the mortgage payments noted above, which are already reported by the recipient on Form 1098). Nevertheless, as the AICPA has pointed out, even relief from reporting for payment card payments would require that a business modify its systems so that it can track payments by the method of payment. Was that $1,000 payment to the Target store made by credit card, or invoice? If the latter, then the company needs to get an ID number for Target, and report the payment.
The continuing concerns of businesses has led to activity in congress to modify or repeal the new rules. For example, in early August the House rejected H.R. 5982, a small business relief bill that, among other things, would have repealed the new reporting rules, because there were unresolved objections to the substitute revenue raising provisions that would have been substituted (the latter oncluded a package of foreign tax changes that have been opposed by Republicans). But the inclusion in the bill of a repeal provision suggests substantial bipartisan support for that measure standing alone. A number of bills have also been introduced to repeal or modify the new rules. See S.3578 and H.R.5141, and proposed amendments to H.R. 5297. Perhaps the most promising avenue to repeal or modification is Senate consideration of H.R. 5297, the Small Business Jobs Act, which would provide for a one-year extension of bonus depreciation provisions and expanded section 179 expensing of asset purchases. Majority leader Harry Reid of Nevada has scheduled a vote on the bill for September 14, including two amendments that would affect the Form 1099 issue. One amendment, by Bill Nelson (D. FL) would raise the reporting threshold to $5,000. The other, by Mike Johannes (R. NE) would repeal the reporting changes entirely.
We at Worldwide ERC continue to monitor these developments closely, and talk to other interested Associations. We are also very interested in feedback from ERC members concerning particular types of payments that would be problematic if the provisions are not repealed, so that we can comment to the IRS. Let us hear from you! Pete Scott


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