In case it interests anyone who doesn't feel like taking the 90-minute course that I'm teaching in December (during which I'll probably tell inane stories) I'm going to host the course materials on my blog. They delve more deeply into the history of Section 9006 of the Health Care Bill (Patient Protection and Affordable Care Act for the wonks) and how small businesses will be effected.
Originally posted on D. J. Marcus's Law Blog
They also offer some suggestions for adapting to the new filing requirements, assuming Congress doesn't modify them before they taking effect, and gives some concrete examples of how things may get complicated for small businesses who deal with multiple vendors on a regular basis. It also explores the few exemptions that exist and what the Houses of Congress have tried to do, so far, to ameliorate its effects.
Download it here - 2010 NBI CLE 1099 Requirements for Small Businesses DJM
If you'd like to register for the course, you may do so here
A few highlights:
One may wonder, how did a technical modification of the Internal Revenue Code get into the Patient Protection and Affordable Care Act in the first place? We must take a quick trip through the legislative history of the bill. H.R. 3590, the base of the PPACA, began life in the House in September of 2009 as the Service Members Home Ownership Tax Act of 2009. Its original purpose was to extend the homebuyer's tax credit for soldiers who were on extended tours of duty and wouldn't return before the expiration of the credit. It also contained two, unrelated tax provisions: one increased the failure- to-file penalty for partnerships and S-corps and the other increased “the amount of any required installment of corporate estimated tax which is otherwise due in July, August, or September of 2014” from 100.25% to 100.75%. The bill passed the House and shifted to the Senate, where it became the PPACA by a large Senate amendment.
(fun, huh?)
Honestly, I expected this change to end up smothering some businesses in paperwork. After a quick search, I discovered that it's actually easy and inexpensive to get the filing requirements covered. Take it from companies who have been doing it for years - Social Security Administration, Google, Yahoo - it's not as bad as you may think.
There are companies that have been providing volume 1099 filing services for years. They can be reasonably priced, for example, one company offers up to fifty 1099s for $45. Another offers unlimited client/filers and unlimited recipients for $199 startup and $99 annually. The IRS has a list of some of these providers on its website, many of which provide the ability to import from Microsoft Excel files or Quickbooks. With normal bookkeeping practices and the ability to import data, most businesses can cover all 1099 requirements for less than $100 per year.
Could it be annoying? Maybe, but the IRS and GAO estimate the new requirements will bring in $17.1 billion over the next ten years. This is money that taxpayers should be paying anyway, but have, either through ignorance or fraud, neglected to include in returns.
Now, take a look at how a few Senators have proposed "fixing" what they did in the Health Care Bill:
Both of the following amendments were proposed as riders to an amendment to The Small Business Jobs and Credit Act of 2010 proposed by Sen. Reid of Nevada.
Nelson amendment (S. Amdt. 4595 to the latest Senate substitute to H.R. 5297) – Senator Bill Nelson of Florida offered an amendment , attached to The Small Business Jobs and Credit Act of 2010, to exempt businesses with under 25 employees from the new 1099 reporting requirements and to increase the threshold reporting amount to $5000, from $600. His amendment would have maintained the new requirement to report payments to corporations. To pay for any revenue shortfall, his amendment also proposed to deny a deduction for major oil and gas companies for income attributable to domestic production. Oil companies were understandably upset about this; the deduction averages $35 billion per year.
Johanns amendment (S. Amdt. 4596 to the latest Senate substitute to H.R. 5297) – Senator Mike Johanns from Nebraska offered an amendment to Sen. Nelson's amendment which would have repealed the entire section and paid for the lost revenue by eliminating funding for the Prevention and Public Health Fund (part of the PPACA) from 2010 to 2017, to the tune of $11 billion. The amendment failed and with good reason. Preventative care has been shown to decrease medical costs by $3.27 and absenteeism costs by $2.73 for every dollar spent. Thus, Senator Johanns' amendment was far from revenue neutral and could easily have cost businesses many times what they have to spend to comply with new reporting requirements.
With links to all sorts of sources - GAO reports, IRS reports, Congressional Record, etc.!