House Republicans will try to use legislation by Ways and Means Chairman Sandy Levin (D-Mich.) that extends Build America Bonds to repeal the mandate requiring small businesses to file 1099 forms to the IRS for any purchase over $600.
“This expanded 1099 reporting mandate has really gotten under the skin of small business owners, and rightly so,” said Small Business & Entrepreneurship Council president and CEO Karen Kerrigan in prepared remarks. “The burden of the new mandate will be tedious, time-consuming, and costly. Business owners across the country are furious that Congress slid the measure in a massive health care bill without understanding its deep impact.”
House Republicans claim the mandate’s expense will take money away from businesses that otherwise could have been used to hire additional workers or retain existing ones.
The mandate was added to the health care bill to ensure small business tax compliance.
Even the National Taxpayer Advocate within the IRS is dissing the 1099 provision
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.. Olson’s office, which operates independently within the IRS, flagged the new reporting requirements as one of its priority issues for the next year. Like many who have delved into the details of the new rules, Olson is concerned about their far-reaching scope and potential unintended consequences.
“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.
In its letters to the U.S. Senate and the House of Representatives, the American Institute of Certified Public Accountants (AICPA) asked for a repeal of the provision:
“We believe section 9006 of the Act should be repealed because the provision imposes extremely burdensome information reporting requirements on business taxpayers that cannot be justified in terms of the limited utility such information reports will provide to the government.”
The letter went on to say, “The expansion of information reporting may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face.”
While acknowledging the IRS’s concern to reduce the tax gap and indicating support for that task, the AICPA suggested that, “the extraordinary burden in this instance far outweighs the potential benefits.”