Hidden clause in ObamaCare will crush small business' w/ 1099's to generate!

[Fonzie]

Explain to me WTF a small business form is doing wrapped up in Barry O's prize bill?!?

Why did these tax code revisions get included in a health-care reform bill? Welcome to Washington. The idea seems to be that using 1099 forms to capture unreported income will generate more government revenue and help offset the cost of the health bill.

http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/

Anything over $600 to ANYBODY you pay for anything....

NEW YORK (CNNMoney.com) -- An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.

Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.

The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.

Taken together, the two seemingly small changes will require millions of additional forms to be sent out.

"It's a pretty heavy administrative burden," particularly for small businesses without large in-house accounting staffs, says Bill Rys, tax counsel for the National Federation of Independent Businesses.

Eliminating the goods exemption could launch an avalanche of paperwork, he says: "If you cater a lunch for other businesses every Wednesday, say, that's a lot of information to keep track of throughout the year."

The paper trail

Why did these tax code revisions get included in a health-care reform bill? Welcome to Washington. The idea seems to be that using 1099 forms to capture unreported income will generate more government revenue and help offset the cost of the health bill.

A Democratic aide for the Senate Finance Committee, which authored the changes, defended the move.

"Information reporting improves tax compliance without raising taxes on small businesses," the aide said. "Health care reform includes more than $35 billion in tax cuts for small businesses ... indicating that during these tough economic times, Congress is delivering the tax breaks small businesses need to thrive."

The new rules could drastically alter the tax-reporting landscape by spotlighting payments that previously went unreported. Freelancers and other independent operators typically write off stacks of business expenses; having to issue tax paperwork documenting each of them could cut down on fraudulent deductions.

More significantly, the 1099 trail would expose payments to small operators that might now be going unreported. If you buy a computer for your business from a major chain retailer, the seller almost certainly documents the revenue. But if you buy it from Tim's Computer Shack down the street, Tim might not report and pay taxes on his income from the sale.

The IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported. Using 1099s to document millions of transactions that now go untracked is one way to begin to close the gap.

While all but unnoticed at the time -- a Pennsylvania business group issued the first warning last October as the idea emerged in draft Senate legislation -- the 1099 rule changes began sparking attention in the blogosphere in the last week. The libertarian Cato Institute called it a "costly, anti-business nightmare"; Rep. Dan Lungren, R-Calif., introduced legislation last week that would repeal the new 1099 requirements.

The notion of mailing a tax form to Costco or Staples each year to document purchases may seem absurd to small business owners, but that's not the worst of it, tax experts say.

Marianne Couch, a principal with the Cokala Tax Group in Michigan and former chair of a citizen advisory group to the IRS on small business and self-employed tax issues, thinks the bigger headache will be data collection: gathering names and taxpayer identification numbers for every payee and vendor that you do business with.

But she also sees a silver lining in the new law.

Her firm already recommends collecting tax data on all vendors, since the IRS requires that you have it on hand at the time of the transaction, not just at tax-filing time. And eliminating the corporate and goods exemptions at least means that businesses will no longer have to pour over every transaction to determine if it needs a 1099. The new rule is simpler: If it crosses the $600 threshold, it's in.

"There are probably going to be some hiccups along the way, because systems will need to be redesigned," says Couch. "But overall I believe it will make compliance on the payor end a lot more streamlined and easier."

In any case, the final impact of the law won't be known until the IRS issues its regulations on the new law, which aren't expected to arrive until sometime next year. The IRS has not yet commented on when it will release regulations or schedule public hearings, and an agency spokesman was unsure when it will do so. The new requirements kick in January 1, 2012.

Edited July 20, 2010 by Fonzie

[SAMBUSA]

Mooooooaaaaar Feeeeeeaaaaaar about a rider

[kawi kid]

im glad i drive the damn truck and am not in the office...........

[Bad324]

we already have 2 girls in our office that will be dedicated to doing all this fucking paperwork. I'm so livid about all this shit it is ridiculous and soon I'll have to deal with it first hand since I will have to take over our companies health care shit. We are going to try and keep the system we have in place right now, but I just can't see it being cost effective for too long and all our employees including myself and my family that owns it are going to be SOL

[Fonzie]

Buy a new computer at Staples.... Guess who you're generating a 1099 for. Stay in a hotel 6 or 7 times throughout the year... Guess who you're generating a 1099 for. Use more than $600 worth of utilities throughout the year.... Guess who you're generating a 1099 for

[kawi kid]

thats why they needed all those new irs workers........ this wasnt something that just slipped through the cracks, bigger govenment

[Fonzie]

Mooooooaaaaar Feeeeeeaaaaaar about a rider

Spend more than $600 on feed for the animals, vet bills, fencing or other equipment?? :wink:

[chevysoldier]

Sign a petition to make obamacare illegal and void in the state of Ohio. Well the petitions get it on the ballot, then we vote to make it void.

[SAMBUSA]

Buy a new computer at Staples.... Guess who you're generating a 1099 for. Stay in a hotel 6 or 7 times throughout the year... Guess who you're generating a 1099 for. Use more than $600 worth of utilities throughout the year.... Guess who you're generating a 1099 for

Shit, I spend 600 in electric every 2 months

[kawi kid]

they had the petition at woodbury outfitters awhile back and i missed signing it..

[ReconRat]

For the individual citizen, it's not enforceable. We don't have enough investigators to regulate. We'd all have to be hired as investigators of each other. Won't work.

I have heard a rumor that this will slam PayPal and eBay transactions.

edit: and that part about it's ok because they gave out small business loans? I've been helping a local business sort through the rulings, and it seems that the banks won't lend out the money earmarked for loans to small businesses. There is no profit in it for them, and a lot of risk. So they are sitting on the money and not lending it out. Another fail.

Edited July 20, 2010 by ReconRat

[Fonzie]

For the individual citizen, it's not enforceable. We don't have enough investigators to regulate. We'd all have to be hired as investigators of each other. Won't work.

I have heard a rumor that this will slam PayPal and eBay transactions.

It's for small business' Tom. Sam has a small family farm. Brian works for his dad, etc

[SAMBUSA]

It wont bother us too much. My wife is an accountant remember?

[Fonzie]

It wont bother me too much. My wife is an accountant remember?

FTFY Bet she won't like it

Forgot though.... She can help me with my acct'ing class I gotta pass by next week

[SAMBUSA]

FTFY Bet she won't like it

Forgot though.... She can help me with my acct'ing class I gotta pass by next week

She has to deal with it at her job too since she does all the payroll there

[Likwid]

blah blah blah

bitch bitch bitch

whine whine whine

shut the fuck up and ride your motorcycle

[SAMBUSA]

blah blah blah

bitch bitch bitch

whine whine whine

shut the fuck up and ride your motorcycle

They're Jewing us out of our money...................NM

[Disclaimer]

See what happens when the free market fails to police itself? Big business crooks get their greedy hands on tax shelters and ruins it for everyone, so now there's some accountability.

Now shut up and ride.

[CattaniAFJ]

Fuck Obama. That is all.

[ReconRat]

It's for small business' Tom. Sam has a small family farm. Brian works for his dad, etc

Should I have said "For the individual citizen business owner, it's not enforceable."?

I don't know where the line will be drawn as to who is doing business.

Only the IRS will know that, and they don't know that yet.

I foresee new jobs with the IRS.

[kawi kid]

I foresee new jobs with the IRS.

obama care created more irs jobs, that was in the bill

http://www.politifact.com/truth-o-meter/statements/2010/mar/29/mark-kirk/kirk-says-health-care-bill-will-lead-irs-hire-more/

[Likwid]

Should this be in ranting and raving?

From what I can tell you're certainly ranting.

[Disclaimer]

<--- from KK's link. That would make a hilarious avatar for some people on here.

Now back to your regularly scheduled political bitching.

[Fonzie]

obama care created more irs jobs, that was in the bill

http://www.politifact.com/truth-o-meter/statements/2010/mar/29/mark-kirk/kirk-says-health-care-bill-will-lead-irs-hire-more/

And now we know why. These extra 1099's are his funding mechanism for his healthcare package

[Ryan_c_F]

edit: and that part about it's ok because they gave out small business loans? I've been helping a local business sort through the rulings, and it seems that the banks won't lend out the money earmarked for loans to small businesses. There is no profit in it for them, and a lot of risk. So they are sitting on the money and not lending it out. Another fail.

Personal banker at USBank here.

Not true at all.

In fact, we're screaming for small businesses to get loans atm. It's tough but if they're in good standing with their credit it's not expressly difficult.

It's just that a lot of the small business owners are strapped as it is. there's not a lot of new growth happening.