New tax filing requirements for businesses in 2012

All business types, from sole proprietorships to corporations, will face increased paperwork in 2012 due to new healthcare legislation, but Greg Jones writes in the Washington Post that a little extra record keeping could improve finances for many small businesses.

In 2012, any business enterprise that buys more than $600 in goods or materials from a single company will be required to issue a 1099 tax form.

Alternatives and exemptions are being considered, such as increasing the amount to $5,000 or exempting small businesses with fewer than 25 employees, reports the paper.

However, Jones writes that this filing requirement actually already exists – but businesses can avoid the paperwork by using a credit card instead of checks to make purchases. A similar loophole will exist in 2012 as well.

Jones believes that the new tax filing requirement will “level the playing field” and help the government identify those businesses that are not reporting all revenue, as well as help small businesses improve their book keeping and accounting.

The Wall Street Journal reports that small businesses are disproportionately affected by embezzlement, and advises that good accounting systems and the use of an outside CPA once a year to review the books can help prevent fraud.