Healthcare and specifically the Affordable Care Act will be the subject of more debate. The new GOP House leaders, have made it clear that their preference would be repeal and replace. That is unlikely to happen but we can expect a lot of tweaking.
Small businesses and the 1099
One area that may see a change will be the 1099 reporting requirement. Under the current law, businesses would be required to send a 1099 tax form to every vendor from whom they purchased more than $600 in goods or services.
This provision, which was slipped into the bill without any debate, is scheduled to take effect on January 1, 2012.
Called the Accountant Employment Act of 2010
Some pundits have called this provision the “accountants’ employment act.” The provision has been called by the U.S. Chamber of Commerce as disastrous for small business owners who would bear the heaviest burden of compliance. Business Week called the provision “the 1099 Nightmare.”
Traditionally 1099-MISC forms were only sent to independent contractors who did not have withholding taxes taken from their wages. The provision in the health care bill would force a massive amount of paperwork and could sink a small business.
For instance, a small business owner buys a laptop computer for his office from one retailer and a printer from another. Both purchases are over $600. Under the healthcare law, the small business owner would have to send a 1099-MISC to the retailer from whom he bought the laptop and also to the retailer from who he bought the printer.
The purpose of the provision was to increase tax revenue but the reality is that it would impose a ridiculous burden on the small business owner. Remember the small business man who bought the laptop and printer. Under the new law he would have to get names and taxpayer ID numbers from the retailers who sold him the goods. Imagine a small business owner having to call up Best Buy or WalMart and ask them for their taxpayer identification. Silly really and almost impossible to be compliant.
President signals a compromise on this provision
Yesterday President Obama indicated that he would be willing to work with Republicans to make changes to the 1099 requirements of the Affordable Care Act. Reuters reported that the President said that if
“The 1099 provision in the healthcare bill appears to be too burdensome for small businesses. It just involves too much paperwork, too much filing. It’s probably counterproductive.”
Expect a renewed motion to repeal this provision of the law as soon as Congress reconvenes.
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