Independent Businessperson's Burden

[RonBoyd]

Health care law's massive, hidden tax change

Yeah, as if you didn't have enough to do:

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

... under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099.

Schedule C, for instance, should now be even more fun. $600 in a 12-month period... that's everybody you buy from.

Of course, it all makes sense:

Why did these tax code revisions get included in a health-care reform bill? Welcome to Washington. The idea seems to be that using 1099 forms to capture unreported income will generate more government revenue and help offset the cost of the health bill.

 

[samclem]

I do a little consulting work. It involves travel. This law means that I have to send a 1099 to every airline from which I purchased more than $600 in tickets (or do I send the 1099 to Travelocity, if that's who I used?). Every hotel chain at which I stayed more than a few nights. Rental car companies, too.
It will be a nightmare for everyone, especially for the airlines and hotels.
I hope everyone will send a few extra copies of the 1099s (sans social security numbers) along with a spicy letter to the White House and to every legislator who voted for this mess.

 

[FUEGO]

Job creation, guys, job creation. Firms will have to hire more people to print these 1099's, collect the data, and ensure compliance. Just think of this as a stimulus bill for the timber producers, paper companies, USPS/Fedex/UPS, tax accountants, IRS, etc. Let's just everyone stop grumbling and all pitch in to help the government in this important matter however we can!

 

[RonBoyd]

Job creation, guys, job creation. Firms will have to hire more people to print these 1099's, collect the data, and ensure compliance. Just think of this as a stimulus bill for the timber producers, paper companies, USPS/Fedex/UPS, tax accountants, IRS, etc. Let's just everyone stop grumbling and all pitch in to help the government in this important matter however we can!

My thoughts exactly.

Or maybe step up the FIRE plans.

 

[Leonidas]

Section 9006...2,409-page document

That just boggles the mind. 2400 pages, more than 9000 sections, what an absurdity.

 

[Nords]

And if you pile up enough 1099s in one year, you might be required to register for and file electronically!

I remember having to order the $%^ing 1099s & 1096s in Sep or Oct just to get ahead of the end-of-year rush. FWIW Quickbooks does the job, as well as 1099 software/forms available at office supply stores.

 

[traineeinvestor]

I'm so glad I am not a small business owner in the US.

One of the best things to be said for HK's tax system is its simplicity - even small business owners only have a handful of returns to file each year.

 

[cardude]

I'm so glad I got rid of my small business back in 2008 ad ER'd.

One of the reasons I got out was because my long time bookkeeper quit abruptly after 30 plus years and I had to hire a new one quickly. The new hire and I drove ourselves crazy trying to figure out all the paperwork, filings etc. Not fun. I'm not a very good detail oriented, paperwork kind of guy..............

 

[FUEGO]

I have helped family and friends a little with tax compliance and paperwork. It really is a huge hassle for a sole proprietor or small business owner to handle the paperwork by themselves, or to do so in an affordable manner by using a CPA. This bill should make things even worse.

Will it increase compliance with tax laws and increase tax revenues, or force those on the margin of reporting income right now into the black labor market where they completely stop reporting income?

 

[dex]

It also cuts down on the padding of expenses and makes it easier for the Gov't to electronically audit a return.

All of these issues are just another indication of an empire in decline - expect more. Also expect, corruption, VAT, higher taxes, user fees, more financial penalties and growth of the underground economy.

The work byzantine sums it up and what we can expect. It isn't used much but it is what we can expect.

Byzantine - Definition and More from the Free Merriam-Webster Dictionary

4 often not capitalized a : of, relating to, or characterized by a devious and usually surreptitious manner of operation <a Byzantine power struggle> b : intricately involved : labyrinthine <rules of Byzantine complexity>

 

[samclem]

Or it will just drive folks to avoid the reporting by spreading purchases around so nobody exceeds the $600 threshold (buy $500 in tickets directly from Delta, $500 from Orbitz, $500 from Travelocity, $500 through the travel agent down the street, etc).

 

[FinanceDude]

Yet another reason I hate Obamacare................

 

[Nords]

Yet another reason I hate Obamacare................

I think when you change the terminology from legislation to personalities, then you've gone from a straightforward legal discussion to politics & personal attacks.

How 'bout a constructive contribution?

 

[swampwiz]

Well, I like the idea that the government can catch all the cheaters out there. As an early retiree living at 133% of poverty, I need my Medicaid.

Now as I understand it, this will only be required of folks who are deducting the expense on Schedule C (or businesses, etc.) So Joe Sixpack won't have to worry about this since he would be a W2 employee. Richie Rich won't have to either since he has all his income as unearned dividends and capital gains.

I don't see what the problem is. When I was active with my software development consulting business, all my clients gave me a 1099. Why can't these businesses do it for everyone? I wasn't allowed to cheat on my taxes - why should anyone be able to? Sure it is going to cost some time and effort, but that's part of the deal of being a small businessman - if you don't like it, go work for someone as W2 and forget about your worklife at 5:00 PM.

 

[Gone4Good]

This sounds like something that will be changed. Already there is legislation introduced to fix this.

 

[REWahoo]

This sounds like something that will be changed. Already there is legislation introduced to fix this.

Why would our elected officials give up more than $300 billion in new tax revenues - revenues they can bring in without having to vote on a "tax increase"? I'll bet it's not going away.

... the provision appears to be a long-in-the-works change that was just waiting for the right moment to be attached to legislation.

Back in 2007, the Senate Finance Committee asked the government's General Accountability Office to conduct a tax-gap study. The resulting report estimated that establishing additional 1099 paper trails for income could provide up to $345 billion annually in new federal tax revenues.

Stealth IRS campaign mandates millions of new 1099 tax forms - May. 21, 2010