Business owners across the land gave a sigh of relief as an unpopular portion of the Healthcare Reform Act was repealed by the Senate two weeks ago. Or was it?
In a bi-partisan 81-17 vote, the so called 1099 requirement would have mandated that all businesses issue 1099’s to anyone, incorporated or otherwise, with whom they engaged in $600 dollars in business in a year.
But don’t celebrate yet.
Called the ‘new 1099 requirement,’ this regulation will require small businesses to file an IRS form 1099 for each vendor from whom they make purchases of $600 or more. Many small business owners and national associations have advocated for the repeal of this provision.
Small business is already burdened with excess record-keeping and government reporting forms. That is a non-productive time waster. That will harm local economies.
Form 1099 is the Internal Revenue Service’s catch-all category for reporting income that needs to be reported for tax purposes but doesn’t fall into the category of wages and salaries.
The rule, which would go into effect in 2012, would require businesses to file a Form 1099 with the Internal Revenue Service any time they spend more than $600 on goods with another business or contractor. That means restaurants, hotels, office supply shops and just about any other business you can think of would be inundated with paperwork from their customers.
If you’re in business, you’re already scrambling to comply. How much did we spend on office supplies, and was the total over $600 with any one vendor. Gotta get their taxpayer ID number and send them one?
It’s a huge burden on small businesses, particularly the small ones, and all so the IRS could squeeze a few billion dollars more out of taxpayers to make up for the costs of so-called health care reform.
Yep. The controversial national health care bill is the first place I’d look for that kind of business accounting tax law change.
It’s had a lot of small-business folks tied in knots, and for good reason.
Even the IRS admits businesses would spend more money complying with the rule than the IRS would recover in otherwise lost revenues.
If you’re in business, this mess bears watching. Many accounting systems are not set up for these rules. Unless the repeal is ratified soon, you’ll have to consider how to comply come January 2012. That means setting up your system well in advance.
So maybe we are actually in 1099 purgatory?