How an obscure provision in the health care law turned small business against Obama and the Democrat

[dkf]

The issue is the 1099 provision of the health care law the president signed last spring. The portion of the law was designed to improve compliance with the tax code. But it means a whole lot more paperwork—paperwork that is particularly onerous for small companies with lower margins and higher overhead costs to begin with.

Before the health care bill came into existence, businesses needed to send 1099 forms to the non-incorporated businesses that provide them with more than $600 in services per year. Now, businesses need to file 1099s to any business that provides them more than $600 in goods or services per year. A nearby restaurant where you have six $100 business lunches per year? You need to get their tax identification number and then fill out a 1099. Purchase $600 in office chairs? 1099.

And it isn't just small-business lobbyists pushing against the change. The Taxpayer Advocate Service, an independent office within the Internal Revenue Service, does not support it either. For one, it will overburden businesses, the advocate wrote in a report to Congress. On top of that, the IRS won't be able to handle the paperwork—given that 40 million businesses, total, will be subject to the requirement, adding possibly hundreds of millions of forms to the tax-agency's files.

Most important, the provision has scant support at either end of Pennsylvania Avenue. Democrats and Republicans in Congress and the Treasury have all spoken out against it. Members of both parties have repeatedly tried to change the rule. They just have not managed to agree on how to raise the revenue that would be lost if the provision is eliminated.

http://www.slate.com/id/2273360/

[Warpy]

1. It would be nice to find out which Republican is responsible

for that particular little poison pill.

[dkf]

4. It's supposed to raise $17.1 billion in taxes so it was probably some well meaning but short sighted

Democrat. That is out of the $118 billion the bill reduces the deficit by.

But you are right that it's a poison pill.

[Ikonoklast]

18. It was Democrats that put that piece of crap in the bill.

It came out of the Senate finance committee, which is chaired and run by Democrats.

The paperwork burden this places on small businesses is stupendous, and I'm not exaggerating.


They are working hard to repeal this, it didn't get to a vote before the election recess, but is going to be brought up as soon as Congress reconvenes.

[pinto]

2. Kick

:kick:

[stray cat]

3. I know numerous small business owners who were concerned about it

[Unvanguard]

5. It will get discarded. The only question is how. n/t

[DebJ]

6. How does this raise revenue? By preventing businesses

from lying about their revenues?

[dkf]

8. Yes.

Our yardman didn't want to give his social security number for privacy concerns and the property manager wouldn't pay him without one. We had to make sure things were legal so that was the end of that.

[PSPS]

14. That's a good question

I can see the argument that it is burdensome. But if they say it raises revenue, that means that companies are underreporting their income and that should be addressed in some way.

But the claim that this "turned small business against Obama and the Democrats" is ridiculous.

[enough]

21. The fact that some companies are underreporting thier income should not be solved by punishing

all business with significant extra paperwork. Believe me, if this is required, it will be a significant additional burden to our small business.

[regnaD kciN]

7. I can testify to this...

I'm on a mailing list with other photographers who sell their work at "art fairs." People there are very upset with this provision, and with good reason -- for those of us who would suddenly need to be sending 1099s to places where we bought various supplies (paper, ink, sales receipt books, frames and mats, business cards, etc., etc.) the hassle would be staggering.

Hopefully, this is a provision that will be ditched forthwith.

[elleng]

9. POTUS has recognized the unintended consequences of this,

and has already said it is one of the 'tweaks' he's seriously considering.

[dkf]

13. One wonders why they didn't take care of it earlier.

[elleng]

19. as in, when, exactly?

[Ikonoklast]

20. There was a bi-partisan effort in the Senate to kill this.

They ran out of time before a vote could be held before the recess.

[Angry Dragon]

10. As far as I know this has been part of IRS regulations

for at least 10 years.

You were suppose to 1099 anyone you paid over $600 to you


edit spelling

[dkf]

15. Apparently that was for services only... Now it's goods plus services.

And it probably increases compliance as the IRS didn't know if the purchase was for goods or services and now you can't claim it was for goods so you are exempt.

[pa28]

17. As well as incorporated businesses. n/t

[NotThisTime]

16. This is true, we have a small (very) business and anything over 600 we have to 1099...

This is nothing new...

[tsuki]

11. I cannot wait until Bechtel and Koch Industries start having to do

1099's for all their purchases. Trust me, this provision will never be implemented.

[pa28]

12. Sometimes well meaning Democrats have a way of shooting themselves in the foot.

The provision creates a significant paperwork burden on small business and opens up additional audit exposure when many are just trying to stay viable and provide jobs in their communities.

The 1099 requirement as well as a possible VAT tax over the horizon will add hundreds or thousands of dollars in extra accounting fees and record keeping/paperwork burdens for small business. Many of those businesses had hoped Democrats would work to level the playing field with the corporate giants they often find themselves competing with.

Modest tax revenues additions generated by extra disclosure are just not worth the exchange of pushing fragile businesses while we are still in the middle of an economic crisis.