April 6 2011
Obama's Signature is the Only 1099 Paperwork Left
Small business rejoice!
Actually, businesses of all sizes can celebrate the repeal of ObamaCare's odious 1099 provision. This rule would have required businesses to file a Form 1099 for every purchase of over $600 or more. Silly, right?
As I've written before, this provision would've imposed a serious cost on businesses:
The IRS estimated that about 85 million 1099 forms are filed each year. That number will jump significantly under the new law. The National Small Business Association estimates that the average company now files about ten of these forms but, under the reform, will have to file approximately 86. The SMC Business Council estimates that the time needed for one 1099 form is one half hour. According to the National Federation of Independent Business, at $74 an hour, tax paperwork is the most expensive paperwork burden that the federal government places on small business. (With a little arithmetic, the average increase in costs for tax compliance to businesses that will have to file approximately 76 more 1099 forms is about $2,812 each year.) In other words, this new paperwork requirement will divert time and resources away from productive activity, forcing businesses to spend millions, if not billions, filing additional paperwork.
The government hopes that this will help the IRS crack down on tax evasion. In fact, the JCT estimates that this provision will bring in a total of $17.1 billion in new revenue over the next ten years. But this additional revenue will cost businesses much more than $17.1 billion because of the time cost and may not prove worth the trouble. Even the Taxpayer Advocate, an independent office within the IRS, is concerned "that the new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance."
The 1099 provision of ObamaCare was one revenue-related requirement that has absolutely nothing to do with health care. On one hand, it is good to see our legislators in the House and Senate using common sense to evaluate this increase in paperwork for what it is: a waste. On the other hand, it should concern Americans that this provision ever became law in the first place.