Health Care Bill Includes IRS Reporting Requirement In searching for funding to pay for the $774 billion
health-care reform, members of the Senate Finance Committee turned to proposals
outside of the health-care arena to raise revenue. Thus, included in the Senate
Finance Committee Chairman’s Mark of the America’s Healthy Future Act of 2009 is a new
burdensome reporting requirement on all businesses. The provision would require information reporting—on a Form
1099—for all business transactions with a vendor, whether incorporated or not,
valued at more than $600 and the reporting requirement would be for both
services and property. It would apply to payments to any single vendor that
cumulatively exceed $600 in a given year. The reporting mandate is a version of an initiative put
forward by President Barack Obama in his budget proposal earlier this year. According
to some, it aims to help the Internal Revenue Service (IRS) track and collect
taxes on income that now goes unreported by enlisting businesses to help create
a paper trail. Congressional aides have estimated that this reporting
requirement could raise as much as $15 billion over 10 years. Under current law, service recipients are only required to
send 1099 forms to non-corporation service providers. For each non-corporation
service provider, the service recipient is required to issue two 1099 forms—one
to the IRS and one to the service provider. With millions of small businesses
filing two forms for each vendor, it is likely that the number of 1099s filed
each year by small businesses could easily exceed 100 million. If enacted, every small-business owner will face increased
paperwork and administrative burden for each additional 1099 form prepared.
Increased costs are incurred for mailing additional forms and for hiring
outside assistance to ensure that businesses are correctly complying with the
law. Furthermore, if a business previously has not been required to utilize the
Form 1099 filing system, greater difficulty with compliance is likely to ensue.
While the proposal seeks to capture non-compliant corporations, it clearly
places the burden on the wrong taxpayer—the compliant small-business. NSBA does not believe that increasing the paperwork and tax
filing burden on an already struggling small business sector should be part of this
legislation. Businesses are already overburdened with tax paperwork and
reporting requirements, so the additional requirements included in the Chairman’s Mark will only increase the cost and complexity of complying with
the tax code. |