As you know, Congress passed the new healthcare law earlier this year and President Obama signed it into law. In addition to healthcare, buried in this new law is a section that greatly expands the requirements for businesses to file information returns to the IRS.
Starting in 2012, companies of all sizes will have to file a Form 1099-MISC with the IRS for all payments made to businesses in the 2011 calendar year. In short, if you spend $600 or more for the purchase of property (goods) and services from a vendor, you will have to file a report for that vendor. The new law lifted the exemption for purchases from corporations and expanded the requirement to include property (goods). As we all know, it does not take long to get to $600.
Unless this section is repealed, businesses will need to report virtually every business to business transaction they conduct. For example, if you buy a new copier for $1,000, file a 1099. Purchase paper from another vendor over $600, file a 1099. Have your lawn care and snow removal done by one vendor costing over $600, file a 1099. Just go down the line in your companies ledger and you will quickly see what an issue this will become.
Another concern is that large businesses will begin to consolidate their outside purchases to just a few vendors to minimze paperwork. That will impact existing small businesses. It will also have a chilling effect on those that want to go into business for themselves. This, at a time when the United States is depending on the small business community to generate jobs and grow the economy. About the last thing needed is more paperwork.
In the end, the ultimate question is what will the IRS do with all that information. The answer is probably not much. The volume will be so great it will be almost impossible to decipher. Unless, of course, we hire more IRS agents.
So, what do we do? The U.S. Chamber has worked to have H.R. 5141, the “Small Business Paperwork Mandate Elimination Act,” introduced to repeal this section. We urge you to call Congressman Pomeroy and Senators Dorgan and Conrad and urge them to support this bill and repeal this untimely provision.
