(Because every piece of new information needs to be received three times before it even registers, this is a reprise of an earlier diary by FiscalAffair. Cross posted on DFNH)
Oh noes! Corporations are going to have to pay.
That's the conclusion reached by this poster on Daily Kos after reviewing the implications of the "The Patient Protection and Affordable Care Act" (now Public Law 111-148).
As explained by this article, the Form 1099 reporting requirement will leave companies "nowhere to hide" when it comes to their requirement to pay taxes they’re legally required to pay. State auditors will walk into audits knowing upfront exactly how much companies have sold in their state. They'll be able to collect back sales taxes and be able to figure out whether the corporation making the sales there should have been filing income tax returns.
Since this accounting stuff is way beyond my ken, I'll let the poster share his perspective:
Companies that object to the reporting requirement say that its "too much work" and "too much regulation". But I’ve filed Forms 1099 for a major corporation and for a small corporation. The REAL work comes from the prior law requirement to EXCLUDE (a.) payments to corporations; and (b.) payments for merchandise or tangible property.
Yes, the HCRA will require me to file MORE forms, but from now on, I’ll simply go through my vendor list and select ALL payees (corporations, LLC’s, individuals, partnerships) to which my company paid more than $600 and I’m done. No fuss; no muss; no trouble. A computer program and printer can spit out the forms in 20 minutes; or, I can outsource them to a contractor (as we do anyway.)
Why reporting what corporations collected from small businesses was previously excluded is a puzzlement. And I note that these new requirements, which are ostensibly aimed at gathering information on how much businesses are paying out as expenses under the cover of health insurance, apply to persons (natural and artificial) doing business -- not individual or married tax payers.
As the Friedman LLP article notes:
Of course, all taxpayers will have the burden of trying to fix the inevitable erroneous Forms 1099s they receive, except that, now, the burden will be multiplied: there will be far more forms, far more filers (including many "first time" filers who had, in previous years, only paid corporations or bought merchandise). More payee data that will inevitably be lost, go missing or be misclassified simply because there will be so much more of it.
This is similar to the new "burden" the recipients of Medicare services now have to check the statements they get from providers of care for accuracy. Since providers of services are now required to send out a statement BEFORE Medicare provides reimbursement, the patient's review of treatments received will be timely. Getting the statement in the same month makes it less likely that memories have gotten cloudy. There's been a steady trend of shifting all kinds of labor to consumers (assembling furniture comes to mind) to be performed for no pay. But, the time spent auditing health care providers seems worth it, as does the effort to make private corporations pay their fair share of taxes.
A very-little reported aspect of the new filing requirements is that the requirements will also provide treasure troves of data for state tax auditors seeking out corporate taxpayers from out-of-state that may be taxable in the auditor's home state and for other purposes.....
state income tax auditors who will come armed with their name, address and the total income the corporation derived from the auditor's home state.....
The states will now have a database readily available to them of a particular corporation's sales to customers within each state. If a corporation has a large volume of sales to customers in a particular state that are not otherwise exempt (e.g., sales of inventory for resale) and the selling corporation is not filing sales tax for the state, the selling corporation will make a particularly attractive target for the state's auditors.
And, there's actually an advantage for small business, as the KOS poster points out:
What’s more, I’ll be able to highlight problem vendors by their Taxpayer Identification Number. Contractors who don’t do good work routinely change their names or their D/B/A name. But with the new law, they’ll all have to supply me with Taxpayer Identification Numbers. I’ll be able to keep a side list of problem vendors sorted by Tax ID Number so that I can flag bad vendors to the purchasing department BEFORE we make payment to them.
See, timing is important. Some Republicans know that. That's why
Representative Dan Lungren (R-CA), has already introduced legislation to repeal the portion of the Patient Protection and Affordable Care Act that will require the additional information reporting. His bill, H.R. 5141, has 90 cosponsors at this writing.
and why getting a Republican majority in Congress is so important. A lot has been accomplished by Democrats, but there's still time to get it undone before 2012. If people will just vote for Republicans and let themselves be snookered by private corporations again.
As every active citizen knows, getting to look at records and gathering information is basic to being effective. Apparently, the drafters of the HCRA were aware.
But an unnamed Senate Finance Committee legislative aide was quoted by CNN as supporting the measure as a means to improve tax reporting without raising taxes. "Information reporting improves tax compliance without raising taxes on small businesses," CNN quoted the aide as saying. And cash-starved states that are struggling to balance budgets will very likely urge their congressional delegations to let the new reporting requirement stand because they can use it as a tool to collect more taxes from out-of-state corporations.
Those of us who fill out our own tax returns know that tax collection relies largely on the honor system. But, we also know that there is no honor among thieves and one has to wonder how much of the $1.8 trillion dollars of cash our corporations are currently refusing to spend (because they are scared to invest in an uncertain environment) is money that should have been sent to state and federal coffers as income tax.
It used to be argued that corporations should be exempt from income taxes because all their net income goes to the individual and family owners of shares. Well, here we now have evidence that, in addition to spending money to buy out competitors and secure a monopolistic advantage, our private corporations are also into simple hoarding.
Don't forget to check in with the Federal Reserve data bank from time to time to see where the money is.