

1099 filings expand greatly starting in 2012: the penalties for failing to file - grellas
http://www.startupcompanylawblog.com/2010/08/articles/tax/summary-of-form-1099-penalties/#page=1

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rmorrison
It seems like a major identity-theft liability to distribute your EIN or SSN
to everybody who's bought $600 worth of goods or services. If you're doing
consulting work, you should have incorporated and therefore have an EIN (which
I suspect is more secure than SSN). But if not, you're going to be giving your
SSN out to lots of people.

Based on the average net-profit of identity theft, would it be worthwhile for
scammers to "invest" $600 to buy a product from somebody who they suspect
hasn't incorporated, just to get their SSN?

~~~
nhebb
You don't need to incorporate to get an EIN. I got one for my sole proprietor
LLC. I'm not sure about other states, but in Oregon it was a single page LLC
application and a $55 fee. (It's now $100, I believe.) After getting the LLC
registered with the state, I sent in the EIN form to the IRS, and a few weeks
later an IRS guy called me to confirm a few of the line items. That was it.

I've created a PDF of my W-9 and have it available upon customer request. I
strongly oppose the 1099-INT reporting requirement, but unless it changes
there are a few things that will make it a little less painful.

 _(BTW, despite the stereotypes, the guy from the IRS was really friendly and
helpful.)_

~~~
Vivtek
I have literally _never_ dealt with anyone at the IRS who was anything but
friendly and helpful.

~~~
mkramlich
Same here. I've had both mail and phone contact with them on a few different
occasions, related to contract paperwork technicalities over the years, and
they were always pretty nice, clear, reasonable, honestly trying to be
helpful, etc. Granted, I try to be exactly those same things to them, so
perhaps that helps.

------
Encosia
There's been at least one attempt to reverse the 1099 reporting changes:
<http://www.govtrack.us/congress/bill.xpd?bill=h111-5982>

Each representative that voted no on this should get an earful. With no riders
on the bill, a no-vote there is inexcusable (especially given the composition
of the votes, which flies directly in the face of certain rhetoric).

edit: Correction, this isn't the bill I thought it was. It does have a couple
of extra provisions (to which votes against should also be infuriating for
most). There's at least one other bill out there that was singularly focused
on reverting the 1099 requirement change, which was also voted down.

In addition to the insane reporting burden this will add, I think important
privacy implications of this change are being overlooked. Spreading SSNs and
EINs as wide and far as this bill requires will certainly result in increased
identity theft.

~~~
ck2
If we don't get them to fix this in an election year, it will never get fixed
unfortunately.

~~~
roboneal
I might argue that we should work "in an election year" voting OUT the idiots
who thought this was a good idea.

~~~
irons
That's not how legislation works. I don't understand why this wound up in the
ACA, but it seems plainly peripheral, and anyone voting against the ACA on the
basis of this legislative oddity would have earned far more wrath than they're
getting now for having passed it.

It's not going to get fixed now because the Republicans benefit more from the
impression that government doesn't work than they do by solving any problems.
It'll get fixed at the eleventh hour.

------
wheaties
So if I want to buy a nice cappuccino machine for the office to congratulate
some hard work, 1099? A few chairs for the office, 1099? License an
application for better productivity, 1099? An order of printer paper, pens,
pencils, staples, paper clips, and pads, 1099?

Stupid bean counters. I bet you're still using SLOC to measure productivity...

~~~
dantheman
I feel that this requirement is only there so that the data can be collected
for a coming VAT in the US. They can't push such unpopular legislation through
at once.

~~~
Vivtek
That doesn't make sense for me. First, US lawmakers don't really think that
far ahead. But more tellingly, this isn't a universal requirement - it just
applies to business transactions that can't otherwise be audited.

I think it's no more than what it appears to be: a ham-handed way to shore up
the traceability of money flow.

~~~
dantheman
And why does the government need to trace money flow?

~~~
Vivtek
The better to tax it, my dear. Presumably. I'm not saying I agree with it - I
don't. Just that it's a smaller leap of faith in my opinion to believe that's
the motivation.

------
jedwhite
This law really does look like a red tape apocalypse. For most of us working
on startups and small enterprises, I'm thinking it will boil down to two
choices:

1) For major purchases (things that have to be over $600) centralise all
expenditure through s single or few suppliers likely to do all the paperwork
for you (as suggested by protomyth).

2) For everything else, forget about loyalty and spread your transactions over
different suppliers to avoid hitting the threshold and not have to worry about
it.

Online services look like one of the easiest things to deal with - Amazon AWS
and Rackspace Cloud and anything where you spend over $50/month is going to
get hit by this. But at least you won't be digging out and counting up receipt
totals by supplier like your starbucks dockets.

~~~
jedwhite
Thank the accounting gods for the comments saying credit card transactions
aren't included.

------
roboneal
How about the government start making it EASIER to start and run a business?

This is just the type of "friction" we don't need in an anemic economic
recovery.

------
billswift
>the number of transactions captured may increase as it becomes more likely
that minor expenditures will aggregate to at least $600 and trigger the
reporting requirement.

$12 a week for 50 weeks, or $50 a month for 12 months, breaches the reporting
requirement. It will be a royal pain to keep track of everything. The IRS is
saying there will be no new requirement _if_ you are paying with a credit card
though.

------
eekfuh
What if you buy starbucks coffee 3 times a week, during work, making it a
total of $600 of goods. Not only do I have to keep track of that, but I have
to get starbuck's tax id.

(of course thats assuming I'm having my company write it off, which I would)

~~~
chewbranca
I work at various coffee shops at least 2-3 times a week usually for a full
day. I would easily have to file for minimum 3 different coffee shops a year.
This bill is absolutely ridiculous.

------
jedwhite
Does anyone know how this works if the purchases are made by an individual and
then some day eventually (hopefully) reimbursed by their company? eg if you
have a startup and are bootstrapping and paying for everything yourself?

~~~
Vivtek
If you're an individual, the same law applies if you count it as a business
expense. The usual disclaimers apply: I'm not a lawyer or an accountant, I'm
just a sole proprietor. There's no legal distinction between being a sole
proprietor with a daytime job and one without - income from your sole
proprietor activity is taxed on Schedule SE for self-employment tax (Social
Security and Medicare) and Schedule C for income tax from a business - and
that's where this applies.

The "I'm not really a business" rule is really, really not one the IRS
believes in.

------
protomyth
This is one of those laws that really needs to be harped about after this
election. It is an absolute killer for small businesses (both as a consumer
and supplier). The only people I see benefiting from this are accountants and
Staples / Office Max (get all your stuff from us and we will do the
paperwork).

~~~
dantheman
Why after - vote out everyone who voted for this crap.

~~~
MichaelApproved
Sorry for the down vote, small buttons on phone. I agree strongly with your
comment. These guys push off votes over and over to a point they don't get
anything done. The biggest bunch of procrastinators ever.

------
ebiester
So.. there has to be a way to benefit from this. Where is the startup startup
dedicated to providing 1099s? The major problem is that all new versions of
quickbooks, if Quicken has any sense, will have an online link to a
proprietary database with all this information.

A feature isn't a startup, but...

------
Anechoic
Reposting a comment from an earlier Hacker News thread on this issue:

The good news is that purchases made with a credit or debit card will be
exempt from this requirement. However this requirement is still likely to be a
huge pain for me at least because I use PayPal for a lot of vendors for totral
purchases over $600 in a year.

The IRS is accepting comments on this requirement at
<http://www.irs.gov/newsroom/article/0,,id=225029,00.html>

~~~
SkyMarshal
What an amazing, and obvious, handout to the credit card companies.
Unbelievable.

~~~
roboneal
I suspect the implications are credit card transactions can be audited by the
IRS anyway.

~~~
SkyMarshal
I figured that too, still a huge political windfall for them.

I see stuff like this and it makes me redouble my commitment to groups like
fixcongressfirst.org.

------
count
I posted this in the last thread about this - it's a different way of looking
at the issue: [http://www.taxgirl.com/new-rules-about-forms-1099-are-
causin...](http://www.taxgirl.com/new-rules-about-forms-1099-are-causing-a-
stir/)

~~~
fexl
The picture in that article reminds me of the scene from the movie "Brazil"
where Harry Tuttle is swallowed up in paper and disappears. That movie is
sadly prescient.

------
mkramlich
I think this weekend I'm going to pass a law amending my own personal tax
system that requires that any entity wanting more than $500 from me, for any
reason, has to fill out, say, a 20 page form (the details of which I'll
specify next week sometime.)

There's a lot to be said for individuals being sovereign. I think we are
anyway. But I have followed a "choose your battles" approach in life so far.
Perhaps one day that will change.

------
lzw
Software development can be done anywhere. The age of needing VC for a rack
full of servers is over. Apps and Internet services can be sold from anywhere.

Why locate in high bureaucracy and regulation regions?

The only advantage I see is being able to go to meet ups of peers, etc.

Would you rather work for your startup and have to live invdowntown LA or SF?
Or would you rather live in the phillapenes or Thailand on a beach?

~~~
andrewljohnson
I would rather live in the mountains of California.

I can deal with the taxes and bureaucracy.

~~~
DanielBMarkham
Business runs on the numbers, not on the scenery.

~~~
andrewljohnson
My numbers are great, thanks :)

I credit all the great hiking, skiing, and fresh air with helping to incubate
our three person start-up. It's worth mentioning that we make GPS software for
the outdoors, so our location is very conducive to testing.

~~~
enjo
Come on over to Colorado... the tax situation is quite a bit more sane and we
have..well all of that:)

