Thanks To The Dim Dems
Inserted into the “Health Care Bill” is a provision guaranteed to cause many more ulcers.
EVERY expenditure by a business for goods or services over $600 will require a 1099 form to be filed.
If you are a transmission rebuilder, that will be every sale.
If you are a contractor who’s truck needs new tires, that will be a 1099 along with the mount and balance.
If you buy a new copier? 1099. How about that $700 flight to the business meeing? 1099. The hotel bill? 1099.
But even worse, it’s $600 PER YEAR. So that cell phone bill? Yup, 1099…
The mind just boggles….
Anyone who makes it to page 737 of the massive health-care bill approved by Congress in March will find a three-paragraph section that has nothing to do with hospitals, doctors, or drugs. The provision, inserted by Democrats on the Senate Finance Committee to help offset the cost of the bill, requires companies to report to the IRS payments of more than $600 a year to any vendor.
A bit further down we have:
Today, businesses must file 1099-MISC forms only for freelancers and other service providers that aren’t incorporated. The form is meant to make sure these workers pay taxes that the business would withhold if they were regular employees. The new rule, set to take effect in 2012, will expand such reporting to include payments to companies, and for goods as well as services. That means businesses will need to get tax ID numbers and file forms for almost all suppliers—and track all their small expenses to see which vendors meet the threshold. Spend $600 on cell-phone service, at FedEx, or fueling up at the local gas station? Better get their tax ID number. Buy new computers? File a 1099. “It’s going to be a compliance nightmare,” says Rob Seltzer, an accountant in Beverly Hills, Calif. He figures he would go from filing two 1099s to 15.
Seltzer is on the low end. The IRS says about 85 million 1099-MISC forms are filed each year, and that could jump significantly under the new law. The National Small Business Assn. estimates that the average company will have to file 95 of the forms under the measure, up from fewer than 20 today.
So as a first estimate, they go to about 500 Million 1099 forms. But I’m pretty sure that’s way low. I doubt that they have thought through how hard it is to spend LESS than $600 per year with any supplier of a business. Heck, the Bagel guy is likely to exceed that in just a few weeks of stocking the coffee room. And how many expense reports today that just ‘roll things up’ will now have to break it out by vendor? Spend a week on the road at 3 hotels? That’s very likely to be 3 Tax ID’s and 3 1099 forms. Fly on 3 airlines? Ditto. Take a couple of clients to a restaurant? 1099.
I think they will spike over a Billion 1099 forms “right quick”.
Then they will have to be included with the tax returns, which means accounting and auditing expenses will rise dramatically. Then the government will need to do something with all of them. Full employment through pushing papers from one desk to another? On your tax dollar?
Small Business Killer
This is just going to kill small business. They have no time nor resources to spend on this kind of stupidity. The example used on Kudlow and Company (CNBC) was a gold coin dealer. EVERY single sale or purchase of a gold coin (a one ounce coin is going for about $1200 now) will require that the 1099 info be collected. Silver coins under $600? I’d expect they will want to collect the 1099 info too. You can’t wait for the end of the year, you need to be able to figure out at the end of the year if you have had over $600 total with one person. And if they have stopped coming in?
When I was doing support work for IT services, it was VERY common to have equipment needs that meant a quick run to the store ( often “Fry’s”, that stocks a lot of stuff) and just slap it on the credit card, then expense it to the client later. Now you will either need to have the client do it and supply all the 1099 info, or you get to do TWO 1099s.
Buy a camera? 1099. Field trip for your department to Disneyland as a thank you? 1099.
If I’d been pondering going back into the business, this spikes it as a dead idea. There is no way on earth I’d step into that buzz saw now.
Time For A Tea Party?
If only the original Boston Tea Party participants could see how tied up in bogus tax rules we are today.
Now comes the watching. Will this be enough to push folks over the edge to taking some kind of action? Or are we just so many steers waiting for the second knife? (For the non-farmers, steers are different from bulls…)
The more I watch how congress “works”, the more I’m certain that the 16th Amendment gave them too much power and of the wrong kinds. Repeal the 16th, and remove the commerce clause while you are at it. We’ve seen that they are not responsible enough to use that power wisely.