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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Get Ready for Billions of Form 1099s

Oct 03, 2010

One of the little items that was included in the Health Act passed earlier this year was the provision that mandates the filing of form 1099 for a lot more items than is done now.

Under current law, a farmer is normally required to issue a form 1099 for payment of:

  • Services or rents paid to an incorporated entity (individual, partnership or trust), and
  • The services in total for the whole year exceed $600

This means a farmer would usually issue a form 1099 for cash rents, the attorney and accountant's bill, custom harvesting or farming services, etc.  I would estimate that most farmers would have 10 form 1099s or less to file in a normal year.

With the new bill, a farmer will have to issue a 1099 for any "products" or services paid to any entity during the year that totals more than $600.  This includes buying fertilizer from the local co-op, etc.  This means all payments to any corporation will be included.

Under this new law, I would estimate that most farmers will need to prepare in excess of 50-100 of these forms each year.

You are required to obtain the name, address and identification number of each vendor you deal with and record this information on the form 1099.  Most accounting software programs already do a good job of keeping track of this information, however, you have to obtain it first.

In addition, if you exceed more than 100 1099, you will most likely have to file these electronically (the IRS may require all filings be done this way soon).

Many organizations are attempting to get this rule repealed.  I know that I spend at least 20 hours or more each year dealing with erroneous 1099 matching letters from the IRS.  If this new law goes into effect, I would guess this may go up by a factor of 5 or 10.

If you are tired of the extra red tape that Congress is requiring of us, please let your representative know.  I think if the Republicans take back the house, there is a good chance of this getting repealed, but we also thought we would have a new Estate tax law right now and that has not happened.

The new law applies to payments made after December 31, 2011 or essentially the 2012 calendar year.

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