• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Senate Fails to Repeal Burdensome Obamacare Business Requirement

    The Senate failed today to repeal one of the more troublesome provisions of Obamacare. Tucked away in the legislation that made Obamacare into law is a tax provision that will be a compliance nightmare for businesses when it goes into effect in 2012.

    The provision calls for all businesses to file 1099 forms with the IRS for all transactions with other businesses over $600. This new requirement will force businesses to divert scarce resources to complying with additional bureaucratic red tape that they could better use creating new jobs.

    The Wall Street Journal offers a telling example of just how burdensome the 1099 provision will be:

    Think about a midsized trucking company. The back office would have to collect hundreds of thousands of receipts from every gas station where its drivers filled up and figure out where it spent more than $600 that year. Then it would also need to match those payments to the stations’ corporate parents.

    Senator Bill Nelson (D–FL) offered the bill the Senate failed to pass today. The bill raises the $600 reporting threshold to $5,000 and exempts all businesses with fewer than 25 employees from the requirement. Nelson’s plan would also have raised taxes on oil and gas companies to offset the cost.

    This half-measure would not have undone all the damage the 1099 requirement will inflict on businesses and the economy. Congress should repeal the entire 1099 provision and should not raise other taxes to offset the cost.

    The 1099 reporting requirement is based on flawed logic. Congress believes that the 1099 reporting requirement will compel businesses to report more income to the IRS because they will all of a sudden either recognize income they were not reporting before or feel it necessary to report income they were sheltering from taxation. More reporting will not bring in more revenue because Congress overestimates how much income businesses overlook or shelter from tax.

    In reality, the 1099 reporting requirement will raise little, if any, revenue. It is phantom revenue that will likely never materialize, so attempting to offset it is unnecessary.

    A better alternative to the Nelson plan is a bill sponsored by Senator Mike Johanns (R–NE) that would repeal the 1099 provision altogether. The Johanns plan is not perfect, though, because it goes through the unnecessary step of offsetting the phantom revenue the 1099 provision was never going to raise.

    Nevertheless, it would remove entirely the painful burden the 1099 requirement will inflict on businesses. When the Senate revisits this issue, it should only consider plans that repeal the 1099 reporting requirement completely.

    Posted in Obamacare [slideshow_deploy]

    20 Responses to Senate Fails to Repeal Burdensome Obamacare Business Requirement

    1. Billie says:

      For what reason is this 1099 of and by the people? For what purpose does it serve the people? Whatever obama can't thieve outside his constitutional duty, remove according to the law! The only reason this country is collapsing is government intervention. Without government intervening mandates, the freedom of the private sector to conduct small businesses is access to the free choice of the consumers!

    2. StarCMC, Missouri says:

      FROM THE ARTICLE:

      "Congress believes that the 1099 reporting requirement will compel businesses to report more income to the IRS because they will all of a sudden either recognize income they were not reporting before or feel it necessary …to report income they were sheltering from taxation. More reporting will not bring in more revenue because Congress overestimates how much income businesses overlook or shelter from tax."

      FUNNY – NO MENTION IS MADE OF HOW MUCH IT IS GOING TO COST THE TAXPAYER TO PAY FOR MORE GOVERNMENT WORKERS TO GO THRU ALL THAT EXTRA PAPERWORK. WHAT A JOKE THIS CONGRESS IS!

    3. Margaret Horvath, Ri says:

      This congress is well on its way to destroying the economic base of this country. It is time to stop trying to cooperate with this President. He is not concerned about the true needs of Americans because he does not understand us. He has shown nothing but distain about things close to our hearts. The sooner people see this, maybe we can stop the total destruction of the American way of life including our economy.

    4. Jill, California says:

      The other thing missing from this article is the lost revenue due to all the time small businesses must divert from income-producing activities in order to compile this burdensome paperwork.

      The time I will have to spend doing this BS will not bring the government previously unreported tax revenue. But it will cost me money, thus lower the taxes I pay. As with everything else this administration is doing, this will backfire badly.

    5. Larry, Springfield V says:

      As a small business owner I am dismayed by the prospects of higher taxes, endless red tape, and increased costs of doing business that accompany ObamaCare. The 1099 requirement is only one of many unacceptable features of the current healthcare "reform" plan that threaten the future viability of more than 30 million small businesses across the country. Clearly the architect of this horrible legislation and its supporters must be driven out of Washington if we're to avoid a national catastrophe!

    6. Drew Page, IL says:

      And they wonder why our businesses are going out of business and moving to other countries. Filing 1099s for every transaction of $600 or more will dramatically bog down businesses and require an army of government bureaucrats to deal with the paperwork. but maybe that was the plan all along.

      Isn't it fun finding out what's in a bill after it's been passed?

    7. Ben C. Ann Arbor, MI says:

      Simple solution – I close my doors and shut the business down. When outgo exceeds income its an easy decision. I'll find something else to do – maybe run for Congress.

    8. Lisa, Millsboro DE says:

      Maybe I'm missing something here, but what does filing 1099's have to do with "Health Care?"

    9. Perry, OK says:

      I have instructed my acct to go to 200 dollars for a 1099. It cost me appx 7.oo per 1099.a tax write off for me and a paperwork nightmare for them. Come on people this is a chance to really choke the system and let everyone know about it.

      To borrow aline from someone smarter than our current leaders"stupid is as stupid does". So join in america file all those and even more. You can always close the doors but it is not so often you get a chance to choke washinton with their own bull soil!

    10. Bob, Savannah says:

      How do we smaller businesses go about getting tax id information (required on a 1099) from Office Max, OFFICE depot, Sam' s Club and gas stations throughout our delivery region. We will go from having to issue 15 1099s to approximately 200 for this year. What a waste of time.

    11. Leon Lundquist, Dura says:

      The point is to have a reason to go after Americans, the point of the Law is not to help anything nor anyone. Progressives use Regulations to go after Loyal Opposition. Everybody is guilty of something, not because Americans are bad, nor that they are actually guilty. Tyrants like it when everybody is vulnerable. That's what Drug Law was all about. It was Racism, pure and simple. It was created to go after the Blacks and Latinos (Yeah, like everything else, it was Democrats.) These days the IRS makes errors, knowingly, and people pay up rather than fight for a year or two to correct the error. No kidding, they did it to me twice. But of course, lifelong Republican, I am on their list.

    12. Chez Bloom Minneapol says:

      Have to agree 100% with Ben from MI.

      "Simple solution – I close my doors and shut the business down. When outgo exceeds income its an easy decision. I’ll find something else to do – maybe run for Congress." So very true.

    13. Hunter Cressall, Bir says:

      I will not comply. I WILL NOT comply. I'll take my chances. I don't have time and I the government can file those documents themselves if they wish to. I keep receipts and records and that is enough. They are welcome to audit me. If there is nationwide noncompliance, then the law will fail.

    14. Pingback: January 2011 tax time surprises - Page 2 - INGunOwners

    15. William Koysaki,Hilo says:

      Would you be able to by pass 1099 requirements if you simply make all $600+ as a personal purchase? Are in fact non-business purchases and /or sales over $600+ covered under new reporting requirement?

    16. Pingback: 10-26-10 Under the Liberty Tree :: Under The Liberty Tree | 2 minutes about freedom

    17. Pingback: What is a "Moderate"?

    18. Pingback: Repeal is Not Enough: How States Can Survive the Impending Medicaid Crisis | The Foundry: Conservative Policy News.

    19. Pingback: Repeal is Not Enough: How States Can Survive the Impending Medicaid Crisis | Fix Health Care Policy

    20. A R says:

      It seems to me that if the IRS and I have a 1099, I will have to report it as income and pay taxes on it.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×