Who will it affect?
It will affect all businesses, including sole proprietors, consultants, self-employed people and freelancers, who are considered businesses for tax purposes, but may not think of themselves that way. It also will apply to charities and other tax-exempt organizations. The National Taxpayer Advocate, based on Internal Revenue Service data, figures that it will affect 26 million sole proprietorships, 4 million S corporations, 2 million C corporations, 3 million partnerships, 2 million farms, 1 million charities and other tax-exempt organizations, and likely more than 100,000 federal, state and local government entities. All told, that’s more than 38 million taxpayers and taxpaying entities...As with most things tax, the complications are in the details, and the recordkeeping complexities. For example, how will you track that $600, if you spend it at multiple locations of the same business? What if some payments are made by check and others by credit card to the same vendor? What about returns? Will a business be required to send 1099 forms to its electricity provider or to its landlord? Get into the thorny details, and the questions — largely unanswered — seem endless. For sole proprietors, who use Social Security numbers for tax purposes, the new rule also raises the potential for identity theft, especially if that number becomes public through printing on receipts, according to the National Taxpayer Advocate. As Steve Henley, a national practice leader at financial consultancy CBIZ MHM, says: “It is a tremendous new administrative burden, and it is so senseless.”
Are there penalties for messing up?
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