Washington (CNSNews.com) – Business advocates are hoping Congress scraps a tax provision in the health care overhaul law that they say is overly burdensome to smaller companies.
So far, Senate and House Republicans have pushed for repeal of this specific provision of the health care bill. Even Democrats asked that the Internal Revenue Service move cautiously in enforcement of the provision.
Currently, businesses and other entities are required to report on Form 1099 any service-related transactions over $600 involving an unincorporated business, such as a solo proprietor, partnership and LLC.
In section 9006 of the health care law, starting in 2012, the new health care law requires businesses, tax-exempt organizations, and government entities to file Form 1099 for every single business-to-business transaction of $600 or more, for both property and services. So small businesses purchases from vendors that exceed $600 must report those transactions to the IRS.
Critics from both parties say this puts unnecessary burdens on small business. The IRS Taxpayer Advocate Services has said this regulation would be difficult for the agency to properly enforce.
Sen. Mike Johanns (R-Neb.) has proposed a Senate bill to repeal the 1099 provision of the health bill.
“The provision will affect 40 million businesses, including 26 million solo proprietorships,” Johanns told a forum Monday co-sponsored by the Chamber of Commerce, the National Federation of Independent Businesses (NFIB) and the American Action Forum.
“I don’t think the Democratic leadership can get away with not bringing it up for a vote,” Johanns said. “But they will vote on a side-by-side amendment that will be window dressing. They will come back and tell you they cast a hard vote for you. Don’t let them do it. It’s a charade.”
Rep. Dan Lungren (R-Calif.) sponsored similar legislation in the House that has 98 co-sponsors.
Democratic Sens. Mark Begich of Alaska, Ben Nelson of Nebraska, Jean Shaheen and Evan Bayh of Indiana sent a letter to IRS commissioner Douglass Shulman on July 12 stating, “We want health reform to work for America’s small business – not burden them,” and asking the agency to “consider ways the existing 1099 reporting standards could be improved.”
But Johanns said nothing short of repeal will work. Asking the IRS to go easy on enforcement will not, he said.
“The IRS is going to enforce the laws passed by Congress,” Johanns said.
Taxpayer Advocate Services, in a report issued earlier this month said it “may propose administrative or legislative recommendations to modify the provision.”
“If a self-employed individual makes numerous small purchases from an office supply store during 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,” the taxpayer advocate report says.
It says the IRS “currently is neither structured nor funded to do the job effectively.”
Nina Olson, head of Taxpayer Advocate Services, said, “If the IRS continues to ramp up enforcement while reducing taxpayer service programs, I would be concerned about its ability to administer the new health care credits and penalty taxes in a fair and compassionate way.”