In the midst of the health care reform debate, a small provision—just a few lines in length—was added to the 2,400+ page document and went essentially unnoticed upon passage. This provision, which radically alters 1099 reporting, will place a substantial burden on companies and small businesses, in particular.
E-mail your Members of Congress today and tell them to revoke the new 1099 reporting requirements!
Issue: A new requirement mandates that businesses must file an IRS Form 1099 for all payments of more than $600 a year paid to providers—including corporations—that provide tangible property and services. This new law significantly changes the impact of the 1099 form, which will now apply to corporate sellers of products and services; the previous law applied only to individuals. Payments via credit or debit card will be exempted from these expanded requirements, as this reporting expenditure will be the responsibility of banks and payment processors. In practice, however, this means that business owners will have to track their purchasing by amount, vendor and method, and then issue the appropriate reporting forms to the IRS and suppliers.
While the rule is set to take effect in 2012, the business community and pro-business members of congress are seeking ways to change the new law. Sen. Mike Johanns (R-Neb.) and Rep. Dan Lungren (R-Calif.) have introduced the Small Business Paperwork Mandate Elimination Act (H.R. 5141, S. 3578) to repeal this part of the health care bill.
Action: Contact your Members of Congress and tell them to support the Small Business Paperwork Mandate Elimination Act and eliminate the expanded 1099 reporting requirements. Send a customizable letter to your congressmen and senators.
• Expanded reporting requirements will increase my paperwork burden and reduce the amount of time that I can spend running my stores. Current tax paperwork and compliance requirements are major expenses for my businesses, which are already running on thin margins in the staggering economy.
• Requiring that I obtain a taxpayer identification number (TIN) before every transaction will cause me and my management team valuable time away from running our business. If I cannot find the information or it is otherwise unavailable, back-up withholding may apply. This will drastically increase the paperwork burden and potential back-up withholding liability on all businesses because so many more transactions will be subject to reporting.
• A Small Business Administration study indicates that the cost of complying with the tax code for small businesses is 66 percent higher than for large businesses. Since this reporting requirement makes almost every business-to-business transaction potentially reportable to the IRS, my small business costs will dramatically increase.
• Franchisees do business with a high volume of vendors. Mandating that I track purchases each year by amount, vendor and type of transaction (credit/debit or otherwise) will pose a great difficulty for me and my managers.
• Although new requirements do not apply to the duplicative reporting of credit and debit card purchases, my financial burden remains the same, as franchisees must pay high transaction fees for each debit and credit card purchase.