Taxes Blog

Finance Blogs » Taxes » Form 1099 reporting rule targeted

Form 1099 reporting rule targeted

By Kay Bell · Bankrate.com
Monday, November 15, 2010
Posted: 12 pm ET

Representatives and senators return to work today facing a lot of pending tax legislation and not much time to pass any of it.

Most attention is on the expiring Bush tax cuts. But before anything is decided -- on whose tax rates get increased or stay the same in 2011 -- Congress is likely to deal first with some tax laws everyone can agree on.

One of those is a business tax that hasn't even started affecting folks yet. But as soon as it was enacted, companies started working to get it repealed.

It's a provision in the health care reform law requiring businesses, beginning in 2012, to file a Form 1099 for most purchases from vendors when the total is $600 or more.

Even if you're not a business, you're probably familiar with some version of Form 1099. It has many variations, but all are designed for one thing: to make sure the Internal Revenue Service knows about taxable transactions.

Lawmakers believe that without such third-party tracking, vendors might be tempted not to report, and pay taxes on, such relatively small amounts.

But with evidence via a Form 1099, the Treasury expects to collect much more of the estimated $345 billion that it estimates goes unreported each year.

Additional corporate 1099 reporting is not a new idea. It was floated by the Bush administration. And few are disputing that sending companies and the IRS verification of more financial transactions would pay off in more tax revenue.

Opponents of the new rule, however, believe that this system is too burdensome for small businesses.

For the last few months, Congress has attempted to repeal or change the law. Some proposals have called for increasing the threshold amount to help exempt companies that make smaller purchases. The Senate even tried a couple of times before the midterm election to repeal the law, but got caught up in procedural and political traps.

Now, though, the Senate's top tax writer says he's fully behind repeal of the law and will work to get that done in this lame duck session.

"I have heard small businesses loud and clear and I am responding to their concerns," said Max Baucus, D-Mont., chair of the Senate Finance Committee, in a statement announcing that he will today introduce a bill to repeal the 1099 reporting law. "Small businesses are the backbone of our economy in my home state of Montana and across the country, and they need to focus their efforts on creating good-paying jobs, not filing paperwork."

What about all that money that's not being taxed? Baucus says he and his colleagues will just have to look for other ways to improve tax compliance. That search should be interesting.

Are you a business owner? Were you worried about this reporting rule?

In addition to tax information on Bankrate, get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
2 Comments
LessGovInterference
November 19, 2010 at 11:39 am

Our very small family business would have to hire another office worker simply to file 1099's. We would be in effect a watchdog for the IRS. THAT'S NOT OUR JOB! This is not only burdensome to small businesses, it's just plain wrong.

The key to economic recovery is not to make it more difficult for small business to thrive, but to make it easier for them to succeed! This bill is an aid to big government and a stranglehold on small businesses!

ShrinkMyTaxes
November 16, 2010 at 5:05 pm

The 1099 rule is going to be very burdensome to small business owners. if you run a business, just think about how many other businesses that you spend more than $600 annually that you'd now have to issue a 1099 to. It will be a paperwork nightmare.

Can you imagine an independent long haul trucker having to issue a 1099 to every gas station they spent more than $600 to? I can't either.

I hope they do the right thing and repeal this part of the "healthcare" bill.