Senate to Vote on Repeal of 1099 Reporting Requirements

Small businesses are coming together to protest the expansion of the 1099 reporting requirement included in the Patient Protection and Affordable Care Act, set to take effect in 2012.  Many fear that the new requirement will be burdensome in paperwork and hinder business growth.

Specifically, the legislation requires businesses making payments to any provider of goods and/or services aggregating more than $600 over the course of a year to send a 1099 to the IRS and the vendor setting forth the amount.  The only exceptions are payments made to tax-exempt corporations.  Previously, this procedure was only required when payments totaling more than $600 annually were made to a service provider.

Among the organizations protesting the requirement is the American Institute of Certified Public Accountants (AICPA), which has expressed its dissatisfaction in a letter to Congress.  In the letter, the AICPA cited several reasons this reporting requirement would hinder, not grow, businesses.

“This 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,” the letter stated.  “When businesses start tax compliance planning for 2012, section 9006 will impose a significant increase in costs on business with respect to the accumulation of relevant information and the preparation and mailing of Forms 1099-MISC.”

Further, the AICPA believes the information collected on the 1099 forms will not be helpful to the IRS in collecting the vendor’s unpaid taxes because it will be difficult to reconcile payments reported on the forms and income reported by the vendor.

Senators and representatives have also voiced their dissatisfaction with this legislation, including Sen. Mike Johanns (R-Neb.), who has proposed an amendment that would repeal the requirement. 

Others have proposed alternative legislation, including Senate Majority Leader Harry Reid (D-Nev.), who hopes that addressing this issue will end the stalemate that has kept the Senate from passing the Small Business Jobs Act.  Expanding the Small Business Administration loan programs, the Small Business Job Act will increase the credit available to small businesses and provide as much as $30 billion in cheap capital to community banks.

Senator Bill Nelson (D-Fla.) has also proposed an amendment that would edit the excessive reporting requirements currently required.  This includes exempting businesses with fewer than 25 employees from the requirement and raising the dollar threshold for reporting purchases from $600 to $5,000.  In addition, Nelson hopes to exempt credit card purchases from the 1099 requirement, an alteration the U.S. Treasury Department was already planning to make.

However, this amendment is not enough for the National Federation of Independent Business and the U.S. Chamber of Commerce, which continue to push for a full repeal of the 1099 provision.

The AICPA also believes a full repeal is the best decision for American businesses, stating that it is “the best alternative to imposition of an overwhelming compliance burden on the nation’s small business community.”

Taking into consideration the objections of the business community, the Senate will come together on September 14 to vote on the relief of this paperwork burden.

Also in this month's issue:

PG&E Takes Proactive Approach to IFRS

Accounting Standards Boards to Propose Improvements to Financial Reporting of Leases