In a follow-up to my piece here on tax and accounting changes that are affecting small and medium sized businesses—in particular the potential repeal of the highly-onerous new 1099 filing requirement changes—I am happy to report another development on the 1099 front that will make the job of the A/P department a whole lot easier, and may spark further interest in the use of p-cards (purchasing cards, or procurement cards) for all size of businesses.
Changes under Section 6050W of the Internal Revenue Code now relieve company A/P departments of the requirement to report payments made with a p-card under the rules of 1099 reporting standards.
This is a big change from the past. It puts the onus of reporting such payments on the paying agent—the bank or third party that pays the merchant, essentially—and takes it off the buyer.
The change was added on to the Housing Assistance Tax Act of 2008 and takes effect at the start of January next year.
It will not only reduce the time and effort put into reporting by A/P departments now using p-cards, but also may make their use more appealing to other companies that have may have shied away in light of the previous heavy reporting burden.
Although the US market for payments is still dominated by cheques, p-cards are an increasingly useful tool for managing procurement and purchasing, as providers offer highly-evolved solutions for payments information monitoring and automated data transfer to other internal systems, such as A/P and accounting systems.
However, aside from the reporting there are still some serious flaws in the p-card regulatory environment that often limit their usefulness—not least lack of vendor acceptance due to high network fees.