Health care law's massive, hidden tax change

[notesdev]

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.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.

Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But 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.

The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.

....

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

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My comment: This is going to be a huge job killer and will shut down a lot of businesses, especially small businesses. There is almost no way that a small business can comply with this change and stay in business, the administrative overhead alone will kill them. (This is why you don't pass 2000 page bills when nobody knows what's really in them.)

[Oregone]

1. "if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099"

This sounds like bullshit...

Seriously?

Isn't that a write off? A business expense. Its considered office equipment (or something like that).

Apple will already tally this in their gross receipts. A 1099 is redundant.

Anyone know if this reporter is confused or not



(other than that scenario, its not the worse idea. Reporting taxes as a freelancer is often like an honor system, since most people don't specifically report their expenses in a way that ties them giving income directly to you. This creates a paper trail that would make many freelancers a bit more honest)

[FrenchieCat]

2. Many Vendors already issue 1099s to businesses they buy from, etc.....

and the businesses that don't still track the expenditures by vendor anyway. the only thing that has to happen is that they have to push a button to generate a 1099.

1099s are currently issued for Rent, Interest Income, Miscellaneous (which includes contract pay and anything else).

This is a way that payments made to insurance companies can be tracked, so that everyone knows how much an insurance company got in income and exactly from where. This will also help verify and review how the 85/15 expenditure ratio for Insurance companies will be applied.....

In addition, Employers will have to disclose to employees how much was paid on their behalf to insurance companies.

It's called transparency, and it cannot happen if there isn't anything additionally done from what is happening now in order to get there.

If anything, it should possible provide more jobs in the accounting area.

[independentpiney]

3. If it is true, I don't see it shutting down small businesses or killing jobs

Without reading the actual provision in the bill, I suspect the article is being a little sensationalistic. But even in a worst case it shouldn't be all that burdensome. Basic business accounting software could handle it using the accounts payable section.

[Scuba]

4. This claim has already been debunked.

Confusing yes. But this is just RW propaganda.

[laughingliberal]

7. I find the article to be accurate. I'd welcome any sources you have to refute it.

Because it is a major concern for us with our little sole proprietorship business and we are worried about it.

[Scuba]

8. Pelosi addressed this on one of the talk shows....

...sorry I can't provide a better reference.

[laughingliberal]

9. I know there was a RW hit piece going around about new taxes which was not true

& I'm wondering if you're confusing the 2. I have read of this in several credible sources (I know CNN isn't the best but they don't generally print RW email forwards as news). From what the other contractors and subs we work around understand, this story is true and I hope they get it changed. We are way too small to find time for this.

[girl gone mad]

10. I have also read about this from other credible sources.

I'd expect a huge amount of non-compliance.

[notesdev]

11. It will be impossible to comply

This will simply be a way for the government to make everyone a criminal and selectively enforce against political opponents. This is a common phenomenon in banana republics and other fascist regimes.

[Winterblues]

5. This is why regulations exist

Regulations hold the weight of Law but are not created by Congress. All that needs doing is fine tuning the Regulations to fix this..

[laughingliberal]

6. I believe I've read there is some legislator or another who is trying to get it changed

to exempt smaller businesses. It will be a burden on a lot of us in the trades.

On edit I found this in the article: Rep. Dan Lungren, R-Calif., introduced legislation last week that would repeal the new 1099 requirements.