It’s not only Taxpayer Advocate Nina Olson who thinks the new expanded 1099 reporting requirement is a bad idea.
Eric Blackledge and Thala Taperman Rolnick, CPA, tax issue chairs of the National Small Business Network, sent a letter last month to the leaders of the Senate Finance Committee requesting changes in the expanded 1099 reporting requirements contained in the recently enacted health care reform law.
Here’s an exerpt from the letter:
The new requirements require totaling, and reporting, by vendor, all purchases of both goods and services from any taxpayer-vendor which total to more than $600 per year. These provisions will have substantial unforeseen consequences and unreasonably high administrative costs for both taxpayers and the government. Although the new requirements do not take effect until January 2012, businesses who try to comply will have to start making major expenditures to modify accounting software and procedures by mid 2011. [We ask that you] re-examine the real benefit of this change in relation to its very high administrative costs and consider adoption of an alternative revenue offset for health care.
Thomas Cheplick of Health Care News agrees with Blackledge and Rolnick:
Small businesses are discovering a little-known provision in President Obama’s health care law may exponentially increase the amount of paperwork they have to submit to the Internal Revenue Service (IRS) every year.
Section 9006 of the Patient Protection and Affordable Care Act dramatically expands 1099 tax reporting requirements, which could effectively put U.S. small businesses at a distinct disadvantage to larger businesses. It will force companies, starting in 2012, to submit to the IRS a 1099 tax form each time they spend a total of $600 on anything—even items such as office supplies, contracting work, or buying a new computer.
Without the financial and personnel resources needed to cope with the avalanche of 1099 paperwork now required, small businesses may have to pay for significant new compliance costs.
Cheplick says that there is already a spirited push on Capitol Hill for repeal of the new law:
Chris Edwards, a tax policy analyst at the Cato Institute, says Section 9006’s ill effects will result in a strong push from small businesses to repeal the new requirements.
“This provision of Obamacare will make us all poorer because businesses will be spending more time with paperwork and adjusting their computer programs, fighting with the IRS,” Edwards said. “There are going to be so many disparities between what records match up with what records. Small businesses do not need this, and the economy does not need this.”
Edwards notes Rep. Dan Lungren (R-CA) has introduced a bill to repeal Section 9006. As of this writing, Lungren’s HR 5141 currently has 67 cosponsors.
“Section 9006 should be the highest priority for repeal of any aspect of Obamacare. This provision is going to be enormously unpopular come January 2012, and many, many businesses have no idea what is coming down the road,” Edwards said.
It looks like this clunker has the life span of a gastrotrich (pictured).
2 responses so far ↓
1 National Small Business Newtork Protests New 1099 Reporting … | Small Business Shout Out! // Jul 8, 2010 at 6:41 am
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2 thala // Aug 27, 2010 at 9:01 am
IRPAC has just come out with the recommendation to exclude publicly traded companies the need to receive Forms 1099. Don’t they realize that this would be devistating to small businesses who would be the only ones who would have to receive them?
See my article on Webcpa.com explaining the problems with the 3 proposals to regarding the repeal of the 1099 provision.
Thala Taperman Rolnick, CPA
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