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As a small business owner, spending time on paperwork is not where you'd want to send your energy. I told you about the legislative changes being discussed that would mean just that - more paperwork. Let me back up a sec. As we know when using 1099 workers anytime the amount paid is more than $600 a 1099 is to be issued. The new legislation added issuing a 1099 when
purchases are more than $600. This is a part of the Affordable Care Act Tax Provision Section 9006 due to take affect in 2012.
Think about this, you need to upgrade your productivity software. If you need to upgrade say, Microsoft Office, Adobe and Norton Utilities, you need to do paperwork, a 1099. But hold on, there are two appeals in play, one to eliminate the requirement for small businesses and the other to exempt small businesses with under 25 employees making purchases with a credit card for more than $5,000.
The odds of either passing are reported low. This subject is a bit controversial among business owners. If you review some of the articles on the subject and associated comments you will see just that. Do 1099s cheat the government? Are they really more work if proper records are being kept? If either appeal gets passed, will this cause some business decisions to be made that circumvent them?
Here's some information for you to decide for yourself...
UPDATE: April 5, 2011
The US Senate voted to repeal the 1099 tax-reporting that would require paperwork anytime vendor payments were $600 or more. For information see the WSJ article: U.S. Senate Passes Tax-Reporting Repeal