Starting in 2010, a provision in the new health care reform law requires self-employed workers, small businesses, charities and government agencies to issue Form 1099s to every vendor that they purchase more than $600 in goods from during the year.
So if your are a small business that buys $700 worth of office supplies from Office Depot then you will be required to send a Form 1099 to the store and the IRS.
This provision in the health care legislations is meant to give the IRS more information about small businesses with the hope that it will reduce the total amount of underreported income in this county.
But this provision will be more of a burden to small business owners than a benefit. Businesses that make qualified purchases from at least 250 vendors during a year will be required to file their 1099s electronically, which means that business owners have to purchase expensive software to comply. Overall you'll find more business owners receiving computer generated nastygrams from the IRS wanting additional taxes and penalties.
Let's hope this law is repealed before 2012.
Source: Small businesses, charities face more reporting rules, Sandra Block, USA Today
