A provision in the Obamacare bill signed by the President mandates that all businesses issue a 1099 form for all vendor payments totaling $600 or more on an annual basis. Scheduled to begin in 2012, this new vastly expands current requirements and places an incredible burden on both small businesses, the IRS and for those environmentalists in the room, trees.
Think about it for a moment. Imagine all the 1099s office supply stores will receive from small business owners. Imagine the back-office policies, procedures and new staff they will need to gather the forms and store data from these tens-of-thousands, if not millions, of forms.And they not only will be reviving 1099s, they will be issuing the forms. Imagine the burden to small businesses. Congressional Republicans are trying to change all that.
House Republicans will try to use legislation by Ways and Means Chairman Sandy Levin (D-Mich.) that extends Build America Bonds to repeal the mandate requiring small businesses to file 1099 forms to the IRS for any purchase over $600.
"This expanded 1099 reporting mandate has really gotten under the skin of small business owners, and rightly so," said Small Business & Entrepreneurship Council president and CEO Karen Kerrigan in prepared remarks. "The burden of the new mandate will be tedious, time-consuming, and costly. Business owners across the country are furious that Congress slid the measure in a massive health care bill without understanding its deep impact."Even the National Taxpayer Advocate within the IRS is dissing the 1099 provision
House Republicans claim the mandate's expense will take money away from businesses that otherwise could have been used to hire additional workers or retain existing ones.
The mandate was added to the health care bill to ensure small business tax compliance.
An estimated 40 million taxpayers will be subject to the requirement, including 26 million who run sole proprietorships, according to a report released this week by National Taxpayer Advocate Nina Olson.. Olson's office, which operates independently within the IRS, flagged the new reporting requirements as one of its priority issues for the next year. Like many who have delved into the details of the new rules, Olson is concerned about their far-reaching scope and potential unintended consequences.In its letters to the U.S. Senate and the House of Representatives, the American Institute of Certified Public Accountants (AICPA) asked for a repeal of the provision:
"The new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance," the Taxpayer Advocate Service wrote in a report released this week.
"We believe section 9006 of the Act should be repealed because the provision imposes extremely burdensome information reporting requirements on business taxpayers that cannot be justified in terms of the limited utility such information reports will provide to the government."
The letter went on to say, "The expansion of information reporting may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face."
While acknowledging the IRS's concern to reduce the tax gap and indicating support for that task, the AICPA suggested that, "the extraordinary burden in this instance far outweighs the potential benefits."
The Republican proposal to repeal with mandate is paid for by reigning in subsidy overpayments related to the new healthcare law. The offset would better ensure that individuals taking part in the insurance Exchange are eligible for the subsidies claimed on their tax forms. Lets hope the GOP is successful (my wife the CPA is exploring the possibility of putting a cot in her office for tax season-not a pleasant thought).