Flood of 1099 forms coming

[WolfeMacleod]

Wayne, you might want to read this, being a business owner yourself.
Just caughtt his posted on a guitar forum. This looks like it will create a massive amount of paperwork...

The CNN MOney link: Health care law's hidden tax change to launch 1099 avalanche - May. 5, 2010'

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

Small businesses threatened with 1099 tax form tyranny provision in health care bill


Small businesses threatened with 1099 tax form tyranny provision in health care bill
Monday, May 24, 2010
by Mike Adams, the Health Ranger
Editor of NaturalNews.com (See all articles...)




(NaturalNews) According to a recent report from CNNMoney.com, the massive U.S. health care system overhaul includes more than just a transition to government-run medicine. A small section hidden away in the 2,409-page bill requires all businesses to send 1099 tax forms to every company or individual from which they purchased more than $600 in services and goods throughout the tax year, beginning on January 1, 2012.

As you'll see below, this new law threatens to cause a wave of paperwork chaos across the entire U.S. economy, stifling the operations of small businesses and driving more jobs overseas.

Here's why...


1099s required for virtually any expenditure
For those of you who aren't familiar with a 1099, this tax document is typically issued to independent contract workers who receive payments for work they've done. "Employees" of businesses are issued W-2 forms at the end of the tax year while independent contractors and other freelancers making money outside of the wage structure receive 1099 forms.

But the new change (conveniently slipped into the health care bill that nobody actually read prior to voting on it) drastically expands the scope of 1099s. Not only will contract workers be receiving them, but so will millions of individuals and companies that receive more than $600 in payments for services and products they provide throughout the tax year.

And if you're a small business owner, you will be required to issue a 1099 to every business from which you purchased more than $600 worth of goods or services.

If you buy a laptop at Best Buy, for example, you will be required by law to issue a 1099 form to Best Buy. If you purchase over $600 in internet services, you need to issue a 1099 to your broadband provider. If you get a car repair over $600, you have to issue a 1099 form for that, too.

This law might as well be called the "Accountant employment act of 2010" because it will drastically expand the mountain of tax paperwork needed to be filed by all U.S. small businesses and corporations.


How the changes will really impact small business
Remember: The new law will require 1099s to be issued to both individuals and corporations. This means that a musician who buys an expensive new guitar will have to send the retailer a 1099 at the end of the year for that purchase. A florist will have to send 1099s to each of her suppliers as well, including the flower growers, the ribbon company and even the place where she buys tape and scissors if those purchases exceeded $600 throughout the year.

In fact, the more sources businesses buy from, the more 1099s they will have to issue, which will likely cause many of them to consolidate their vendors.

Do you see where I'm going with this? These "small" changes are going to have a monumental impact on how business is run in America, particularly small businesses who are already strapped with heavy regulatory burdens. 1099s will be used for a lot more than just taxing compensation. They will be used to tax virtually all business expenses, driving up prices for everyone.

The changes are also going to create an "avalanche of [new] paperwork", according to Bill Rys, tax counsel for the National Federation of Independent Businesses. Business owners are going to have to spend a lot more time tracking purchases and saving receipts, which for many is going to be a logistical nightmare that could drive them right out of business.


Small businesses will go out of business, thanks to the IRS
Those of you that own or operate a small business already know how difficult it can be to stay afloat and compete in today's economy, especially during tough times. Besides the regular day-to-day operations, there are all kinds of fees, taxes and other regulatory burdens that make doing business a challenge.

Can you imagine having to track and tally every single business purchase you make throughout the year and send 1099 forms to all of them? How about having to collect names and taxpayer identification numbers from every vendor or payee that you dealt with? Can you imagine how long it would take on the phone with Wal-Mart customer service to try to obtain the company's tax ID? Multiply this by the other five hundred companies you do business with, and you start to get an idea of the new burden this is going to place on small businesses across America.

It's going to take a whole lot more time to comply with these rules, and many small businesses will probably have to hire someone full-time just to take care of it all. The additional expense will either further strain companies who can take the hit (which will just drive up prices for consumers) or force them out of business. But no matter how you look at it, it's a lose-lose situation for American businesses.

And what about all the companies on the receiving end? Imagine the flood of 1099 forms companies like Apple will receive at the end of the year from all the freelancers who bought new computers from them? Or Office Max for millions of dollars of office supplies? The burden will be tremendous not only on those who have to track and send all the 1099s, but also on everyone who receives them.

And it's not just the big guys that will bear the burden. There are plenty of small, family-owned suppliers who are going to have a tough time complying. Many of them will most likely be forced out of business because they won't be able to absorb the cost. Or businesses will choose instead to make purchases only from large "one-stop" shops because the paper trail will be a lot easier to manage.


Government greed and corruption is ruining America
The U.S. economy is already in shambles and many Americans are unemployed, but leave it to the American government (and the puppet masters who control them) to increase the burden on American business even more. Are these people out of their minds?

This small tax change is going to have huge ramifications once it kicks in starting in 2012. Small businesses will take the biggest hit, resulting in even more lost jobs and higher prices for goods and services. Many companies might decide to just pack up shop now and move to another country before it all kicks in, and that means more American jobs being exported to other countries.

The whole thing speaks volumes about how things are run in Washington where it's all about money and control. Bureaucrats are always looking for new ways to pass new laws that will bankroll their out-of-control spending programs. You know... the ones that get them reelected.

Fortunately, not all politicians are in on the game. Rep. Dan Lungren (R-Calif.) recently introduced a bill called "The Small Business Paperwork Mandate Elimination Act, which would rescind the 1099 provisions from the health care bill.

It's a good start, but what about the rest of the politicians? Where is the outcry from the alleged "public servants" over tax changes that threaten to destroy American small businesses?

Small businesses are the primary drivers of our economy. They are the ones responsible for real job creation in America. Provisions like the 1099 mandate only work to destroy the very fabric that has held America's economy together. Any government that tries to destroy this crucial sector is only accelerating the country's financial demise.

It's time for people to wake up and take a stand against this paperwork tyranny. A nation drowning in tax forms can't get much of anything else done, and Washington, it seems, just can't help but heap another tax compliance paperwork nightmare upon the People.

That is has all been hidden inside the health care reform bill is yet another insult to the intelligence of us all. Who do these politicians think they are? How quickly they forget that Government derives its power from the People and not the other way around.

[Pazuzu]

Why is this the first that we've heard of this? Why is it that 19 days after the article, no one knows about it?

Why do I think that the article writer might have misunderstood what he was discussing? I have trouble believing that it would have remained unknown this late if it was as overwhelming as the article makes it seem...

[cstreit]

I've known about it for more than a month.... It IS overwhelming. I know of a slew of potential startups in the works right now just looking at dealing with this issue...

[Jagshund]

But the healthcare will save us all. Praise Jesus!

[WolfeMacleod]

Originally Posted by Pazuzu

I have trouble believing that it would have remained unknown this late if it was as overwhelming as the article makes it seem...

Just thinking abut the number of places I would have to issue 1099's to scares the hell out of me. Almost every component I use is from a different company. And consolidating it? Forget it....
$600 worth of gas? Chevron gets a 1099
Tools? Home depot... 1099
$600 for postage? USPS gets a 1099.. think about how many 1099's they'll have to deal with!

$600 for utilities? `1099's..
business car insurance? 1099's...

The number of 1099's I would have to issue as a two-man company is probably a hundred or more...

[Pazuzu]

And that's my point, this seems so absolutely ABSURD that I wonder about it's legitimacy, vs. someone misinterpreting the legalese.

[Porsche-O-Phile]

On the one hand I'm actually kinda' okay with this since it doesn't add to existing law, it merely enforces it. And it starts whacking consumption, which we should be doing.

On the other, the whole attitude of "well it's OUR money (not yours) and we have a right to know where it is - and charge you for the privilege of using it" doesn't really resonate with me.

[McLovin]

Existing law does not require a business to send a 1099 form to vendors from which the business purchases more than $600 in a year.

Under existing law, the majority of small business send out only a handful of 1099s each year. This is a huge change/addition to existing law.

And Pazuzu, as crazy as it sounds, I don't think there is any misinterpretation about it. Seems pretty clear:

Starting in 2012, that changes. All business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you're making the payment to -- even if it's a giant retailer like Staples or Best Buy -- at the time of the transaction, or else facing IRS penalties.

These are the kinds of gifts that will keep coming over the years. Kinda happens when you pass thousands of pages legislation that no one even bothered to read, or no one really even knows who wrote.

It's part of the new efficiency in Govt. Back in the old days, they used to actually read the proposed legislation before passing it. They'd even do things like *gasp*, debate it, sometimes in PUBLIC! Wow, what a waste of time. We're much better and more efficient now, having dispensed with such quaint old fashioned notions.

[pete3799]

Hell......every time i fill up my Peterbilt i'd have to send them a 1099

[Zeke]

McLovin, where did your quote come from? If it's not the actual text of the law (I doubt it since it mentions companies by name), then it's someone's interpretation. You are seemingly incorrect about the existing tax code on 1099's. We do send 1099's out to vendors that are not incorporated and often run by an individual as a sole proprietor (not the same in all cases).

In the future, there will be no doubt about this. However, having purchases from a large interstate corporation like the HD will probably not be included in the mandates.

Let me try an example from the Peterbuilt comment above: he buys fuel from Exon Mobile all day long, all week long. No 1099. He buys oil from a small independent distributor that is not incorporated, he sends a 1099.

Now, "small" corporations and S corporations may become an issue. If the IRS can't or won't recognize them readily, they will deny your deduction. So, it becomes a matter of your accountant's directive. The IRS will allow your Staples receipts especially if backed up by a monthly account, credit card purchases or your business check.

What they will do is crack down on actions such as people picking up cash receipts in the parking lot and dropping them into their deduction file. But, that's another discussion.

In conclusion, I have to 1099 all non employee compensation and all suppliers that are on a cash basis as it is. There are instances when both criteria are met in a single payment. For sure, you need to 1099 that.

[Porsche-O-Phile]

Under present law you're supposed to file a 1099-MISC every time you bill/earn more than $600 in a given year as an independent contractor. I don't see the change here, really just nothing more than a change in interpretation/clarification of existing law.

[McLovin]

Originally Posted by Porsche-O-Phile

Under present law you're supposed to file a 1099-MISC every time you bill/earn more than $600 in a given year as an independent contractor. I don't see the change here, really just nothing more than a change in interpretation/clarification of existing law.

You are reading the new rule wrong.

Under the old rule, when a small business buys $600 of papers and staples from Office Depot, it is not required to send a 1099 to Office Depot.

Under the new rule, it is required to do so.

[Tobra]

Originally Posted by Pazuzu

Why is this the first that we've heard of this? Why is it that 19 days after the article, no one knows about it?

Why do I think that the article writer might have misunderstood what he was discussing? I have trouble believing that it would have remained unknown this late if it was as overwhelming as the article makes it seem...

It is not the first I have heard of it, not even second or third.

I just got a fax from my insurance agent, about the tax break for healthcare. Lots of extra paperwork, tax breaks for a few years, then you get all the paperwork and none of the tax breaks when they expire

The 1099 thing I heard about from my state association a while ago.

[legion]

Harry Tuttle: Bloody paperwork. Huh!
Sam Lowry: I suppose one has to expect a certain amount.
Harry Tuttle: Why? I came into this game for the action, the excitement. Go anywhere, travel light, get in, get out, wherever there's trouble, a man alone. Now they got the whole country sectioned off, you can't make a move without a form.

[McLovin]

Originally Posted by milt

McLovin, where did your quote come from? If it's not the actual text of the law (I doubt it since it mentions companies by name), then it's someone's interpretation. You are seemingly incorrect about the existing tax code on 1099's. We do send 1099's out to vendors that are not incorporated and often run by an individual as a sole proprietor (not the same in all cases).

That's a big difference, isn't it?

As a small biz, you might send a 1099 to an INDIVIDUAL (i.e., a human person) for goods or services provided.

But don't you think it's a big deal if that is expanded to include corporations? So every time you, as a small business contractor, go to Home Depot (or ANY other vendor/supplier) and spend $600 in a year, you have to send a 1099 to Home Depot. (Or ATT for your phone, or Yellow Pages, or your insurance companies, bonding companies, etc. etc. etc.)

I don't know how many stores, shops, vendors, etc. you bought from in your business, but many small business have hundreds of companies they buy more than $600 in goods from over the course of a year. Now each and every one of them will have to be 1099'd.

[A930Rocket]

And why do we have the new 1099 form requirement? You guessed it... VAT!

[Porsche-O-Phile]

I'll have to see the text of this law. It sounds quite silly the way it's being presented now.

Has anyone checked snopes?

[McLovin]

It does sound silly/hard to believe. But you of all people should know that in this new era, truth is stranger than fiction.

Here's the text and an explanation. Not really hard to understand, there is no dispute about this in the accounting world. Some of the big changes are "corporations" are now included as "persons" for purposes of sending 1099s, and you also have to send it for "amounts [paid] in consideration for property" (i.e., when you buy paperclips, you are paying consideration for property).

Health Care Bill Section 9006 and Your Small Business-HUGE New Small Biz Expense!)

[Rot 911]

Originally Posted by Porsche-O-Phile

I'll have to see the text of this law. It sounds quite silly the way it's being presented now.

Has anyone checked snopes?

The law is real and it has been depicted accurately. We have been talking about it on the law forums for the last month.

Here is an article from May 5, in the money section of CNN.com: Health care law's hidden tax change to launch 1099 avalanche - May. 5, 2010

[McLovin]

I do find it humorous that we live in times where the line between a joke/hoax, and real law/policy is indistinguishable, though.