Form 1099 Mandate Hidden In Healthcare Law Being Addressed Tomorrow

Bill Smith, Editor: Tomorrow the US Senate is expected to vote on two amendments addressing the infamous Form 1099 provision in the health care law. The provision mandates that all small businesses (includes sole proprietors, farmers and ranchers), churches, non-profits, government agencies, report all the sources at which they make purchases or acquire services when those services go over $600 within the tax year. It does not matter that you have your purchase receipts from local Wal-Mart or Staples store. If you are a farmer or rancher, it does not matter that you are refueling your truck at a local gas station and have the receipt. If you buy over $600 from that gas station or at Wal-Mart in the year, then you will have to do a Form 1099 to report the total purchases from those sources. In addition, you must secure from the sources their registered tax ID number.

The IRS has acknowledged that they do not know how they will handle or use the flood of 1099s that they will receive as a result of this provision in the health care law. Imagine 40 million small business of which 26 million are sole proprietorship now being required to follow this process and file Form 1099 because of "hidden obscure provision" inserted in the health care law verses properly being addressed and openly discussed in a tax bill.

The clear intent of the provision is to establish a threat to small businesses and sole proprietorship. First, it forces businesses to establish a new costly business system to tract the source of every single purchase in hopes of avoiding fines by the IRS. Next, it is meant to create fear in those who may be working but not reporting their income or paying income taxes. Recall when Speaker Pelosi said we would have to pass the bill so that we will be able to find out what was in the bill. Well, we are no finding out! Also, remember when Sen. Harry Reid said that paying income taxes is voluntary. What planet are these Democrat leaders from?

With bipartisan support, the U.S. House has already voted to repeal this Form 1099 provision. However, the Senate has not done so. Democrat senators are being pressured by the White House to vote against the amendments because the White House does not want one single word in the health care law (Obamacare) amended. They are demanding absolute loyalty from all Democrat Senators to not to repeal this provision in the bill. The White House appears to fear that one change will eventually open the door to other changes. However, senators are returning from the August recess with an earful from the voters back home. Small business owners do not like this costly burdensome provision.

Two amendments being offered in the Senate have different approaches. Sen. Bill Nelson (D-FL) calls for partially relaxing the Form 1099 provisions. However, the Nelson amendment creates a new problem by forcing businesses to consider not growing by making business file these Form 1099 provision if when they add a 26th employee. It does includes a higher threshold at which Form 1099 will have to be prepared. As identified in the Billings Gazette says: "The Nelson amendment simply won’t solve the problem. It would the IRS to create confusing new regulations, and further complicates the rules of what does and doesn’t need to be tracked and filed. It wouldn't lessen the paperwork nightmare, would still amount to huge accounting expenditures for business owners and would result in more IRS audits. In essence, it would make what was already a compliance nightmare worse for small businesses."

Sen. Mike Johanns (R-NE) amendment would simply repeal the onerous Form 1099 reporting requirements from the health care law.

When this amendment is voted on, we will see which democrats are concerned about small businesses in their states. With all Republicans voting for repeal, it would take at least 19 Democrat Senators to vote for repeal for the amendment to pass. As mentioned previously, the White House is pressuring the returned Democrat senators. Tomorrow, we will learn which Senators will do the right thing and stand up to support small business.

Considering the next step: It is doubtful that President Obama would veto the small business bill if the Johanns' amendment is approved, At this moment before the 2010 elections, President Obama is seeking to appear to be supporting small business.

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