Apparently, tucked away inside the Stalinization of Health Care Act of 2010 was yet another little tidbit that will make doing business in America a nightmare of headaches. No, this isn’t even the Stalinization of student loans…
When an independent contractor (say, a business consultant or interior decorator, etc.) does work for another business, he’s paid on contract and the client usually issues an IRS Form 1099. A 1099 (to simplify) basically takes the place of a W-2. Since the independent businessman doesn’t have a “boss” who issues him checks, this is how the IRS keeps track of his income through this work. Now, a 1099 isn’t like writing a receipt. It’s a very intrusive document that collects information like Tax ID numbers, addresses and contact information, state and federal tax witholdings. The simple IRS instructions only take eight pages, though. Fortunately, however, these forms aren’t needed for every contractor or service provider or person from whom you buy something. Oh, until now:
Thanks to SoHCA2010, there are new and much more onerous regulations for anybody who runs a business and purchases goods and services–which is every business. An accounting firm called RIA reports:
The 2010 Health Care Act adds “amounts in consideration for property” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(1)) and “gross proceeds” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(2)) to the pre-2010 Health Care Act categories of payments for which an information return to IRS will be required.
From Cato @ Liberty:
Basically, businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a hell of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.
In a grubbing attempt to squeeze every penny out of their subjects citizens, the government is doing an effective job of ensuring the economy does not rebound anytime soon.
Well, at least we finally passed it so we can now find out what’s in it. right, Nance?
-Nick (ColoradoPatriot, from HQ)
No one cares because this will still affect only a small number of voters in the same way that only a small number of taxpayers will be affected by the upcoming tax increases. I’d bet that the folks that are going to be required to do all these 1099s are probably the same folks that get to pay the higher taxes, namely small business owners.
Hunter : You are missing the point. Increased business/corporate taxes and increased business/corporate costs are ALWAYS passed on to the consumer.
Well I have to wonder how this would affect such things as internet publishers that use places like DrivethruRPG.com. That was my first thought was it would squish small businesses like those.
Yea this could potentially cripple our business. Maybe even totally put us out of busines, just because of the shear volume of paperwork we’d have to do. We’re a VERY small company, but the amount of money that flows through our business is HUGE and we have lots of customers and we deal with all 48 states and some of canada… which means we’d have to give and get 1099’s for over 250 customers. There’s maybe a handful of our customers that are one time customers that have done less than $600. We’re kinda holding our breath on this, because if this doesn’t get repealed or changed… we may be out of business by the time it completely goes into affect. Very scary! We’ve only been around for less than 2 years and are starting to really do well… but maybe not for long.
I know that, Tnns, but they don’t ever seem to make the connection because the cost is spread around, so it doesn’t connect with them. My sister is a true socialist, but when I talk to her about some of the ridiculous costs the governments place on my business, she is surprised…but she doesn’t deal with them in a daily basis, so they go “poof!” It’s the same way with income taxes…most folks don’t pay much, so they have no problem with increases or increase spending.
Business Management 101 – the purpose of a business is to maximize the profits of the business owners. Anytime the government arbitrarily increases the amount of time required to comply with the current political fashion of the day you are making it more difficult to maintain a business OR to make a profit. Perhaps it would be best for all concerned if we admit defeat and we can all work for the government. We can skip the middle man (IRS) and just submit to our betters (aka the brilliant social masters du jour)