Thursday, October 28, 2010

Thursday, September 23, 2010

Health Reform Act Will "Run Up the Ol’ Blood Pressure" of Small Business Owners

If you think the health reform act will cause some degree of irritation in your business, well, Brother, you ain’t seen nothin’ yet! For Your Information, slipped largely unnoticed into the new health bill is a radical change of the use of IRS tax reporting Form 1099. Under current law, 1099's are used to report income paid to independent consultants and contract employees and such. Beginning in 2012, businesses and sole proprietors will be required to issue 1099’s to any business or vendor providing more than $600 of goods or services over the year, regardless if payment is by check or credit card; even vendors providing supplies used in a business’ manufacturing processes. This will result in an avalanche of millions – no, probably billions -- of tax forms each year…a major burden for business… and the IRS as well. The rationale seems sound, but….

The IRS estimates that some $300 billion of income goes unreported every year – the “underground economy”, as it has been labeled. For example, you call Tim Burr and ask him to deliver a cord of firewood to the house. You’ll leave a check in the mailbox. Tim says, well, I’d really prefer cash. That way I don’t have to bother with the IRS. Hopefully, you will find someone else to deliver firewood, but the point is that someone who obviously lacks business experience, thinks, well, let’s just 1099 the whole dad gummed world, and we’ll catch enough unreported income to help pay for this trillion dollar health bill.

Just think about it. You fly to New York for a business trip. You have to 1099 Delta. You have to 1099 Marriott. (Can you fathom how many 1099’s Delta and Marriot will receive, and how many they will have to issue?!) If you take a group of clients to Mario’s Italiano, you have to 1099 Mario. If you buy office supplies from Staples, you have to 1099 Staples. A real estate agent buys a laptop from Sears, she has to 1099 Sears. Sears must 1099 hundreds of thousands of its vendors. You must 1099 the power company. No need to go on; you can see how onerous this will be. We met one small business owner – a consulting firm with only 11 employees who travels a good bit. He estimates he will have to issue 9,800 1099’s in 2012! This, for a company of only 11 people. And, how in the world will IRS be able to handle this tsunami of tax forms? Those folks probably keeled over when they learned about this.

Editorially, we’ve seen some stupid things attempted in Washington, but this has to go to the top of the list; and no apologies offered for bluntness. This needs to be repealed; nipped in the bud before businesses have to spend money to gear up for this. Rep. Daniel Lungren (R-CA) has introduced a repeal bill, H.R. 5141, The Small Business Paperwork Mandate Elimination Act. If you agree, contract your Congressman and let him/her know how you feel and suggest he/she support H.R. 5141.

Authored by J. Smith. Kanier & Co.
www.jsmithlanier.com