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1099's for all transactions over $600

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I really hope this gets repealed else I'll have to get a mainframe to run quickbooks.


Posted on Fri, Aug. 06, 2010

Did Congress really paper over American health care reform?

<h2 id="sub_headline" style="font-size: 1.5em; line-height: 20px; letter-spacing: -1px; margin-top: 10px; margin-right: 0px; margin-bottom: 5px; margin-left: 0px; "></h2>By M. THERESA HUPP

Special to The StarIn March, Speaker Nancy Pelosi said Congress had to pass health care reform so we could find out what's in it. Now we are finding out.

Buried in the voluminous bill is a provision that will increase paperwork for thousands of individual and corporate taxpayers, including me. This provision will supposedly reduce tax evasion.

Section 9006 of the Patient Protection and Affordable Care Act amends Section 6041 of the Internal Revenue Code to require businesses — the self-employed, for profit and nonprofit corporations, and governmental entities — to send Forms 1099-MISC to each vendor from which they buy goods valued at more than $600 annually, starting in 2012.

Before the Patient Protection and Affordable Care Act, Forms 1099 were required only for individuals and unincorporated businesses (not most corporations) that received more than $600/year "for services rendered." The Patient Protection and Affordable Care Act broadens 1099 filings in two ways: The forms must be sent to corporations, and they will apply to goods as well as services. Debit and credit card payments are exempt, but card terms aren't always as favorable as cash or check.

In a news release dated July 7, the IRS said, "Beginning in 2012, all businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year. …For example, if a self-employed individual makes numerous small purchases from an office supply store in a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases."

In other words, if your freelance business spends more than $600 during a year in supplies from OfficeMax, you have to send OfficeMax a 1099, and copy the IRS. If you have a small handyman business and buy more than $600/year in materials from Home Depot, you have to send Home Depot a 1099, and copy the IRS.

Of course, to send a 1099, you need each vendor's taxpayer identification number. If your supplier doesn't give you its identification number, you must deduct 28 percent of the purchase price and forward it to the IRS. How will that work at the cash register? "I'm sorry, Mr. Retail Clerk, I can only pay you 72 percent of the purchase price, unless you give me your employer's tax identification number."

I am an independent consultant and freelancer. Assuming my business continues into 2012, I will likely spend $600/year with two professional organizations and a few suppliers. How will health care be improved when I and thousands of other freelancers each send out several 1099s?

I am on the boards of several nonprofit organizations, each of which spends more than $600/year with many vendors. Their suppliers include national corporations and utility companies. Why should the limited resources of these non-profits be spent collecting taxpayer identification numbers so they can send these corporations 1099s?

I want to stop tax evasion as much as Congress does. Taxpayers who deduct business expenses should keep receipts to prove their claims.

If they can't, their deductions should be denied. But requiring small businesses to send large corporations Forms 1099 is not the way to stop tax evasion or to fund health care.

The IRS announced in Notice 2010-51 a public comment period until Sept. 29 on this expansion of Form 1099 filings. If the new law affects you, go tohttp://www.irs.gov/newsroom/article/0,,id=225029,00.html to learn how to submit a comment. And copy your congressional representatives. Ask them to repeal this aspect of the health care legislation, particularly if they voted for it in March, before we knew what was in the bill.

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