Health reform means more paperwork for small biz

May 12, 2010 by Jim Giuliano

Posted in: Finance, Legal & Compliance, Special Report

records

Buried in the new health act is a measure mandating that you issue 1099s — lots of ‘em — to many vendors, not just contractors.

As your A/P people certainly know, a Form 1099 is used almost exclusively to document payments to contract workers. Make that it was used almost exclusively for contract workers. As of 2012, businesses will have to issue a 1099 to just about any vendor for goods or services totaling more than $600.

Consider the possibilities of how the law will work in practice:

You buy a new computer for your business from a store. You’ll have to 1099 the store.
You buy the computer online from Apple’s Web site. You’ll have to 1099 Apple Corp.
A local office-supply outlet delivers computer-printer paper to your business. As soon as the purchase amount hits more than $600, you’ll have to 1099 the outlet.
You hire a plumber to come in and do repairs in your building. The bill comes to more than $600. You’ll have to 1099 the plumber.

It’s easy to see how the transactions could number into the hundreds, even thousands, in a typical year.

a. Why the change?

b. Why is it part of healthcare reform?

The answers:

a. The IRS wants more ways to track revenue, because the agency believes it’s missing out on $300 billion in unreported income.

b. Included in the health bill are changes aimed at raising the money needed to fund reform. The 1099 stipulation is one of those changes.

There’s some legislation being floated in Congress right now targeted at repealing the 1099 requirement. If no repeal gets passed, the new law will cover any transactions that take place after December 31, 2011.

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Tags: 1099, health, IRS, reform

Esteban

This is nothing new. The law currently in place requires the issue of 1099s for all vendors of goods and services.

Can Business Brief explain how the new law differs from current requirement? And what exactly is the connection to the Health Care Bill? There are tons of add ons on that bill that have nothing to do with the HCB. Your headline is misleading.

Sounds like an attempt to enforce something currently in place to find additional tax revenue.

In any case, the once a year issue of 1099s is not that big an deal since it is incorporated into just about every business account software. Largest impact is the once a year postage – not exactly a big impact on small business.

What is missing from your article? Thanks!

Esteban
http://www.hrmorning.com Jim Giuliano

Estaban:

We may have to agree to disagree. To answer your questions and comments:
“This is nothing new.” Prior to this proposal, there is no requirement to issue a 1099 when, for instance, a business buys a desktop computer from the local computer store. That is just one example of how the new law differs from the old.

“What exactly is the connection to the Health Care Bill?” The new 1099 requirement has a direct connection with the HCB because it is one of the ways to increase tax revenue to fund HCB. So, in fact, your later comment is correct that it is “to find additional tax revenue.”

“The once a year issue of 1099s is not that big a deal.” Payroll people we talk to say otherwise. The law requires a whole new process of identifying who gets a 1099, and greatly increases the potential number of 1099 transactions that must be recorded and reported.

Thanks for reading and commenting.
Jim Giuliano
Managing Editor
BusinessBrief.com
Jim

And how is the IRS going to accumulate all this data and cross check this information?? They can’t even handle the ones they get now! Of course this means pretty much means almost all business will have to file their 1099′s online since they will be over the threshold.
kate

Estaban you are mistaken that the current law states that all vendors for goods and services must have a 1099. It is for only non incorporated vendors that must have a 1099 if goods and services are purchased over $600. Most large businesses are incorporated these days, but several localized business might not be such as the plumber, electrician, local store that is not chain store affiliated. these smaller not incorporated businesses do require a 1099 already and yes, Jim if you purchase a computer over $600 from one of these nonincorporated stores you must issue a 1099.
http://www.CactusWrangler.com Beth Terry

There are unintended consequences of this new law that seem to have escaped the writers of it. First – not only will we be increasing the number of 1099′s we issue ten and twenty fold, we will also be sharing more information about ourselves “out there.” While i Realize that you can now pay $20 and find out anything about anyone, doesn’t this mean Tax Id’s will be spread to a larger group, thus increasing the problems associated with ID Theft? And secondly, not only will we be sending more, we will be receiving more. Small business is already buried in red tape and paper, this is just another layer. And Third, Esteban, you are assuming that everyone uses Quickbooks. I use Quicken. 1099 is NOT incorporated into it. Neither is automatically asking for the Tax ID of Apple computer, GoDaddy Software, APS Electrical, AZ Eddy’s Air Conditioner Company, Staples, etc. It’s a nightmare, and another attack by an administration who has never met payroll, doesn’t understand the ups and downs of small business, and sees us as the cash cow that will support this monstrous bill.

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