CNN Money publishes a piece warning of the red tape that is part of ObamaCare:
The new regulations, which kick in at the start of 2012, require any taxpayer with business income to issue 1099 forms to all vendors from whom they purchased more than $600 of goods and services that year. That promises to launch a fusillade of new paperwork: An estimated 40 million taxpayers will be subject to the requirement, including 26 million who run sole proprietorships, according to a report released this week by National Taxpayer Advocate Nina Olson....
"The new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance," the Taxpayer Advocate Service wrote in a report released this week.
The author of the CNN Money piece, Neil deMause, wrote a similar story about the 1099 provision back in May in the Budget & Tax News publication of the Heartland Institute, a free-market-oriented think tank:
The requirement will now include items such as shipping charges, hotel bills, and equipment purchases, all currently exempt from 1099 reporting.
While the notion of sending a tax form to Costco for every large purchase may seem absurd to small business owners, that's not the worst of it, says Marianne Couch, a principal with the Cokola Tax Group in Michigan and former chairwoman of the IRS Information Reporting Program Advisory Committee's subcommittee on small business and self-employed tax issues.
"It's not so much the increase in the 1099s that will be the primary issue—although that certainly will mean, most notably in first year, significantly higher numbers of pieces of paper going out through the mail," she says. Rather, she says, the biggest headache is likely to be data collection—gathering names and taxpayer identification number information for every payee and vendor that we do business with.
The new law contains two separate provisions eliminating exemptions that have applied to 1099 filings. The first eliminates the exemption from issuing 1099s to corporations, now treating them the same as individuals for reporting purposes. In the second, the phrase "amounts in consideration for property"—i.e., purchases of goods—is added to the existing requirement to issue 1099s for services.
The president of the National Federation of Independent Business, Dan Danner, had also flagged the 1099 requirement in a Wall Street Journal op-ed that we noted here back in May.
The FutureOfCapitalism Bolton Bureau, which sent the link to the CNN Money piece, categorized it as LOUC, or law of unintended consequences. I think that may be a little too generous to the lawmakers who voted for ObamaCare, but any assessment of their intentions is inherently speculative.
