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U.S. House votes to repeal burdensome 1099 reporting requirement
Looming reporting nightmare for business closer to being stopped On Thursday, March 3, the U.S. House voted 314-112 to repeal a provision in the federal health-care law that will require businesses to file 1099 forms with the Internal Revenue Service any time they spend more than $600 a year with any other business. In February, the U.S. Senate passed a similar bill by a 87-17 margin. The two versions must now be reconciled, and hope for repeal is promising. Scheduled to go into effect in 2012, this requirement is a significant expansion of the current 1099 reporting requirement, which applies only to payments to unincorporated service providers. The PA Chamber has been working with the U.S. Chamber and more than 1,000 nationwide chambers of commerce, trade groups and business associations in calling on Congress to repeal this provision, which even President Barack Obama acknowledged in his recent State of the Union Address presented an undue red tape burden on small businesses. Section 9006 of the federal Patient Protection and Affordable Care Act requires any taxpayer with business income to issue a 1099 to every vendor, including corporate entities, from which they purchase more than $600 of goods and services. Effective January 2012, these new regulations will subject 40 million taxpayers (including 26 million who run sole proprietorships) to burdensome reporting requirements. The requirement translates into a significant cost and red-tape nightmare for business. According to a SMC Business Councils survey, a typical small business sees 10 filings per year of 1099s; the new rules will push that to more than 200 filings per year. Some of the unforeseen consequences of the new 1099 requirement include the reality that smaller businesses may cut down on the number of vendors with whom they do business, ultimately harming an entire supply chain. Larger vendors with the ability to accommodate these complex reporting requirements are better suited to assisting customers with tracking their purchase information, where smaller vendors without such a means will lose out. If allowed to go into effect, the provision will dramatically increase accounting costs, expose businesses to costly and unjustified IRS audits, and subject more small businesses to the challenges of electronic filing. ### Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of Business. |
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