While catching up on my daily news I read today that the Senate was unable to rally enough votes to end debate on two amendments that would have eased the burdensome 1099 filing requirements imposed on all businesses. In case you didn’t notice this law was passed as part of the health care reform bill in an effort to increase tax collections. Unfortunately, few lawmakers in Washington had considered the effort and cost required by small business owners to track and report this additional information.
The new Patient Protection and Affordable Care Act requires businesses to report any purchase of $600 or more from a vendor for goods or services during a calendar year. The law is scheduled to take effect for purchases made in 2012, which would be reported on the 1099 form filed in 2013. For those unfamiliar with 1099s, this form is sent to each vendor and likewise sent to the IRS for matching purposes. The apparent intent behind this law is to reduce the tax gap, or taxes on unreported income. New, higher fines are imposed per form on small businesses who neglect to file these forms.
Unfortunately, no one considered the amount of work and extra responsibility this requirement places on the backs of the small business. The AICPA and other small business advocacy groups have been pushing our friends in Washington to fix this problem since the new law was passed. Currently, the new form not only requires reporting the amounts, but it also includes boxes for each month of the year. That’s right, in order to complete the currently proposed form one would need to track purchase amounts for these vendors by month and include them on the form.
Let’s hope our representatives in Washington hear the people and fix this soon!