1099s no longer just for contractors starting 2012

[Michelle Gower-WordPress Mentor]

NEW YORK (CNNMoney.com) -- An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

...under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the
supplier a 1099 at the end of the year tallying up their purchases.

Thoughts? Read the article in full, and come back to discuss.

http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_...

[Christine Alexander]

All these regulations a business must jump through is just too much :-(

[Pat Howlett]

I need to chew on this a bit more (news to me) but on surface I don't really have a problem with it. I'm 100% for smaller government - but have never had a problem with sound accounting.

I agree with the comment... "The new rule is simpler: If it crosses the $600 threshold, it's in."

I also agree with... "the bigger headache will be data collection: gathering names and taxpayer identification numbers for every payee and vendor that you do business with."

I certainly have to look at my account systems to make sure that I can do this automatically. For instance a "flag" is set when a client or vendor gets close to the $600 point.

Interesting!

I just wish that the guys and gals in DC had the ____ to put this in a "Business Bill" and NOT a "Health Bill". They are cowards and think we're stupid and that's what ticks me off.

[Michelle Gower-WordPress Mentor]

Comments go back and forth on what you just said, Christine. Some say hey, just let Quickbooks do it for you, and others point out that WE the business owners will be the ones paying double taxes and/or fines for not getting the TAX ID number of all the vendors, or if we misspell the name on the 1099.

This means: gas stations, office supply stores...Dell, Apple, airlines, food, insurance companies, car dealers, mechanics, computer repair at Best Buy...

[Michelle Gower-WordPress Mentor]

@Pat the comments thread over there has a comment for every possible emotion one could feel on the topic. The seeming common theme is that it's a way for the IRS to get businesses to report on each other.

I believe that most businesses, just like most individuals, are honest on their taxes. What is potentially frightening to many is the thought of being taxed again, and fined, for things like misspelling the vendor's name, or being given a false or incorrect tax ID number, if they can get that information at all.

Another concern is privacy. As Jason Pedley pointed out, many sole proprietors use a social security number. If I want that social, he says, I just have to buy $600 of product or service from you, and it's mine. I personally don't want MY ssn floating around, I don't know about the next guy.

Also brought up is the fear of small business losing even more business because of other businesses trying to not reach the $600 threshold--including where they buy gas, the computer at Dell, the company car repairs, the office supply stores.

My thought is that I wondered if it was possible for retailers, especially Dell, airlines, etc. to start including their tax ID number on all receipts to make it easier for us to log them, since we will now HAVE to keep every single receipt even if we had no intention of writing the expense off. Still doesn't answer the question on social security numbers.

That's a lot of receipts being logged in order to tax someone else, IOW, now we are being forced to police each other whereas in the past, I was only worried if I paid my own taxes, I now have to report (even if indirectly) whether you are paying yours.

It's in the healthcare bill because it was designed to be used to offset the cost of the healthcare. I wonder if this is what Pelosi meant when she said we'd just have to pass the bill in order to find out all the good things that were in it? :)

[Christine Alexander]

This really bothers me. It just seems insane to think a business should have to do all that tracking.

[Pat Howlett]

Have now had the chance to chew on this and read/research a bit more.

Can't see this having ANY redeeming qualities and agree that as soon as others start to see what this means... it will not survive.

Anyone with constructive ideas for letting our representatives know what a mess this creates for the small business person?

Thanks Michelle!

[Katrina M Harrell-Biz Strategist]

I was actually interviewed by the Associated press (by way of the NASE) regarding this very topic both from the perspective of a financial professional and small business owner and my answers were very simple. I was asked what did I think the impact this bill would have and I responded that while I think many business owner will make an effort to meet this requirement, I doubt many of them will succeed! Some will simply avoid it as when they receive the bill from folks like me they will opt to not bother next time. I also commented on the point that largest businesses like cell phone companies would be responsible for sending 1099s to millions of their customers. LOL Just writing this makes me laugh at how absurd it is!

But I responded to this post (I see it was from May) as I wanted to provide you all an update! In response to Pat's comment, in fact there has been much protest over this bill and groups like the AICPA and the NASE have even lobbied on behalf of the public to have the House repeal this ludicrous bill. It seems though this has worked and for the time being we won't have to worry about this.
What worries me more though is the fact that this as well as the American Jobs and Closing Tax Loopholes bill were "sold" to us as bills to help create jobs and help foster small business growth but in reality are filled with "tax loopholes' that almost 100% come at the back of micro businesses! I can go on and on but it saddens me that the government doesn't view the work you do Michelle as a "business" nor do they think the time you spend Pat creating a network community that creates jobs by giving the opportunity for folks like myself to keep myself self-employed (and paying my taxes) by allowing me to network and find referrals!

I've been keeping up with this and the other tax loopholes and even wrote about it here. on inside919 and on my blog site.

I'll keep providing updates if it's helpful to you all! It's sort of my job to do it anyway and I wouldn't mind!

[Katrina M Harrell-Biz Strategist]

Sending 1099 to all your vendors over $600 may not be a big deal. Especially if you're like me and sort of self contained and don't outsource much. But how do you feel about receiving 1099s from people YOU pay as a vendor? As far as sound accounting Pat, even the AICPA things this is totally absurd. We are required to keep sound records as business owners and required to have our vendors complete W-9. We report expenses on our tax return and if there are red flags, correct, we are audited and must prove it. This is exactly what it is, just a way to pay for the health car bill.

[Julie Jones]

Are they trying to kill the economy??