Congress adjourned its year-end lame-duck session on Wednesday after passing legislative fixes for several pending tax issues, including the estate tax, the expiration of the 2001 and 2003 tax cuts, an alternative minimum tax (AMT) patch, and extensions of many expired provisions. However, it failed to repeal the expanded Form 1099 reporting requirements that were enacted as part of this spring’s health care reform legislation.

The tax changes made during the lame-duck session were enacted as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act of 2010, PL 111-312), which Congress passed on Dec. 16, and President Barack Obama signed into law the next day.

Expanded 1099 Requirements

One major tax issue Congress did not resolve was the expanded Form 1099 reporting requirement. Currently, payments to corporations are excepted from the Form 1099 information-reporting requirements. But starting for payments after Dec. 31, 2011, businesses will be required to file an information return for all payments aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation). This change was made by the Patient Protection and Affordable Care Act (PL 111-148), enacted in March 2010. In addition, in a change made by the Small Business Jobs Act (PL 111-240), taxpayers who receive rental income from property will be required to issue Forms 1099 to service providers for payments of $600 or more during the year, effective for payments made after Dec. 31, 2010.

The Tax Relief Act of 2010 does not include a provision to repeal any of the expanded Form 1099 reporting rules; two votes to repeal the expanded Form 1099 requirement rules with regard to corporations failed to pass the Senate on Nov. 29. In December, Senate Finance Committee Chairman Max Baucus, D-Mont., introduced a separate bill to repeal the new 1099 rules with regard to corporations (not landlords), but he was unable to obtain the unanimous consent needed to advance the legislation.

According to Peter Kravitz, AICPA director–Congressional & Political Affairs, Congress is likely to revisit this issue early in 2011. However, as of Jan. 1, 2011, taxpayers who receive income from rental property should start keeping adequate records of payments, so they will be prepared to issue correct 1099s in 2012. They will also need to obtain the name, address and taxpayer identification number of the service provider, using Form W-9 or a similar form.