Legislative Rx for 1099 ailment
Friday, January 21, 2011
The health care law is safe despite the House of Representative's repeal of the measure on Wednesday.
But a reporting regulation created as part of the Patient Protection and Affordable Care Act is now closer to being eliminated.
I'm talking, of course, about the new Form 1099 rule, which mandates that next year every business file a separate information form for each vendor with whom it does $600 or more of business.
It was included in health care to help the IRS track income it believes goes unreported. Plus, the provision is projected to raise $17 billion to help pay for health care reform.
The measure has caused business owners a lot of distress well before its actual implementation.
Lawmakers tried repeatedly last Congress to ax the provision. Politics got in the way.
Next week, however, the House Ways and Means Committee, now under Republican control, will hold its first hearing on health care and repeal of the 1099 rule is expected to be on the agenda.
This is one prescription for tweaking health care that has wide bipartisan support.
Three Democratic Senators -- Ben Nelson of Nebraska, Maria Cantwell of Washington and Amy Klobuchar of Minnesota -- already are pushing repeal. Thursday, the trio sent a letter to House Speaker John Boehner (R-Ohio) urging him to "work on efforts to improve" the health care law.
Specifically, the Senators want the House to take up and pass H.R. 4, a bill that would strike the 1099 tax reporting mandate from the health reform law. And they cited a new (at least to me) argument against the expanded reporting requirement:
The provision may also have the unintended consequence of distorting behavior in the marketplace, as large businesses will have an incentive to minimize their reporting requirements by consolidating purchases with large vendors, harming small, regional vendors.
The White House is not expected to oppose repeal efforts.
So soon, businesses should be feeling a lot better.
- Form 1099 repeal fails yet again
- Repeal of new Form 1099 reporting rule back
in Congressional sights
- Senate uses Form 1099 as political bludgeon,
fails to fix reporting problem
- Senator slams SBA for not taking a stand
on new Form 1099 reporting rule
- Lawmakers seek repeal of new 1099 forms
- Effort to repeal 1099 reporting fails
- Tell the IRS what you think about the new
Form 1099 reporting requirement
Want to tell your friends about this blog post? Check out the buttons -- Tweet This, Reblog, Like, Digg This and more -- at the bottom of this post. Or you can use the Share This icon to spread the word via e-mail and and online avenues. Thanks!
As a bookkeeper and tax preparer I have watched this issue with interest and much concern. The objections of my colleagues and I aren't just about small businesses suffering as a result of big businesses consolidating purchases with big vendors. It goes much deeper than that. The whole process puts a heavy burden on small business owners with limited staffs (or more realistically no staffs at all) who are already struggling to keep up with tax reporting document management. Now not only will they have to track credit card receipts separately from check/cash receipts, but they have to make sure that the minute they purchase $600 of lumber, copy machine toner, or toilet paper from anyone, they have to get W-9 reporting information or (God-help us) deduct withholding taxes. Then there are the privacy issue concerns involved in requiring vendors of everything from pizza dough to gold bullion potentially having to provide social security #'s to every business person that purchases widgets from them. Just trying to make sense out of what Congress deems to be considered as "goods or services" has some of my clients cringing. I mean really, isn't everyone from Southern CA Edison to the retired vet who washes the storefront window once a month...providing some sort of "goods or service". (Where are we to draw the line!) Was it truly the intent of congress for 1099's to be issued to everyone who receives a payment from the mom & pop corner bakery? Surely not! But how are we to know, when the language is so unclear. Then there is the 1099 Form reporting itself. Will "purchases" be reported along with "services" as "Non-employee compensation" on the 1099-Misc form...where they can be misinturperted by an IRS key punch clerk who sends out a CP-2000 Notice reguesting "Self-Employment Tax" be paid on the Box 7 Income that was not reported correctly on the Taxpayer's Schedule C? Yikes. The list of potential problems goes on, and on!
Posted by: Bridget Colern | Saturday, January 22, 2011 at 05:36 PM