ASMP Issues Call to Action on Proposed Tax Rule
ASMP has put out a call to photographers to help protest proposed IRS reporting rules for all business transactions over $600. The new rules, which are scheduled to take effect in 2012, are intended to capture income tax revenue from transactions that might otherwise go unreported. But the proposed rule change would also create an additional paperwork burden for businesses.
Under the proposed rule change, if business owners pay any vendor more than $600 for goods and services in a given tax year, they would have to to report the total expenditures by issuing a 1099 form to each vendor–and forwarding a copy to the IRS.
Currently, businesses have to issue 1099 forms for payments over $600 to independent contractors for their services. But the new rules would extend the requirements to cover all goods and services purchases, including purchases of cameras, lenses, computers, office supplies, and other equipment.
That would mean not only tracking all expenditures (a beneficial thing in itself from a financial management standpoint), but issuing a multitude of 1099 forms at the end of every year. And to issue the forms, business owners would have to collect the name, address and tax ID number of every vendor.
To make matters even more difficult, if you purchase goods and services from a vendor who isn't incorporated (and therefore doesn't have a tax ID number), you would have to withhold the income taxes on the transaction yourself. Other businesses would have to withhold taxes on fees paid to you if you're not incorporated–which could compel a lot of photographers to incorporate.
Whether the rule change goes into effect–and what form it ultimately takes–depends upon the strength of the opposition. At least one Congressional representative has introduced legislation to block the rule, which was mandated as part of the recent health care overhaul. (The idea was to help pay for the reform by capturing portion of the $300 billion or more in tax revenues that the government loses each year because of unreported business income.)
The ASMP's call to action includes a draft of a sample letter for the convenience of photographers who want to protest the rule change.
August 30th, 2010 at 2:44 pm
Every unincorporated photographer should get a Tax ID Number as a business and use that on his/her Schedule C.
I advise all clients with Schedule C’s to get a Taxpayer ID Number and do not use their social security numbers. This makes it easy to give the tax id number to clients.
August 30th, 2010 at 4:39 pm
“But the new rules would extend the requirements to cover all goods and services purchases…”
As a point of clarity: It’s my understanding that the new rule only applies for purchases made with cash or check. Any payment made with a credit card is exempt. While this doesn’t make the rule that much better, it does make the amount of potential paperwork far less scary, as most purchases can probably be handled with a credit card.
Am I incorrect?
September 2nd, 2010 at 2:47 pm
Isn’t this a method to tax a person, twice on the same goods or services?It doesn’t seem to be fair or balance either way one slices it. Sure will make paperwork for a business even more of a headache, than it is now. With all the tracking of invoices, contracts and booking assignments, who will have time to shoot? Seems the new rule will do one thing and that is a few lawyers richer, than help with healthcare.
September 10th, 2010 at 8:17 pm
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