We were very excited a month ago when it looked like 40 million business owners and organizations weren’t going to have to gather 1099s on all goods purchased over $600. After the elections, it looked like the income Republican majority was going to overturn the provision, tacked onto the Affordable Care Act. Even President Obama was on-board.
Not so, my friends. While we were trolling the Internet for Cyber Monday goodness, the Senate blocked the Small Business Paperwork Relief Act, poising companies for a paperwork nightmare come 2012. Businesses already must report labor above $600 a year. But now … that computer you purchased? Your office supplies? You will document it all and send it in to Uncle Sam if something doesn’t change.
Come Again?
Why would we even be in this situation? The original move, which was rolled into the Healthcare Reform bill passed back in March, was designed to bring in more federal revenue and curtail tax delinquency. The White House expects the measure will collect $19 billion in otherwise unreported income over the next decade, and the hope is for the recovered funds to subsidize the health care overhaul. The Senate rejected the “revenue provision” repeal because there wasn’t an agreement on how to make up for the lost revenue.
While this revenue provision affects all businesses, the ones who haven’t yet transitioned to electronic accounting will be especially hurt. Even the IRS is scratching their heads on how they’re going to handle this change.
But Nobody Wants it, Right?
President Obama called upon Congress to rethink the revenue provision at a November press conference.
“The 1099 provision in the healthcare bill appears to be too burdensome for small businesses,” he said. “It just involves too much paperwork, too much filing. It’s probably counterproductive.”
Tax Girl is befuddled, pointing to lawmakers who promised to expunge the provision.
“Clearly underestimating the rage of voters and business owners, members of Congress (yes, the same ones that voted it in) vowed left and right to do away with it, she said. “Apparently, those folks in Congress have a short memory. Today, the Senate had not one but two opportunities to do away with the requirement.”
The Small Business Administration decried the provision last month in a letter to small business owners, even contending that the repeal wouldn’t affect health care funding.
“The repeal of this provision through the Small Business Paperwork Relief Act will not adversely affect the Affordable Care Act, which provides important health care benefits to millions of Americans,” writes SBA Administrator Karen Mills.
Until then, business owners everywhere are taking a “wait and see” approach.