The Patient Protection and Affordable Care Act (PPACA) includes an expensive new tax information reporting requirement, which will fall heavily on small businesses. Currently, businesses report – on a Form 1099 – any service-related transactions over $600 involving an unincorporated business (sole proprietor, partnership, and LLC). Beginning in 2012, the new healthcare law requires businesses to send Form 1099s for annual business-to-business transaction of $600 or more for both property and services.
This means that a small business owner will have to file two forms – one with the vendor and one to the IRS – for almost every business-to-business transaction. In addition, since Form 1099 reporting requires the inclusion of a Taxpayer Identification Number for the vendor they do business with, small business owners will also be forced to spend time tracking down the number for every vendor requiring a Form 1099.
The reporting requirement substantially increases compliance burdens on honest small businesses.
- Increases paperwork and administrative burden for every additional 1099 form prepared. Small businesses lack an in-house finance department to track this kind of reporting and that is why complying with the tax code is already 66 percent more expensive for a small business than a large business.
- Increases costs incurred for mailing any additional 1099 forms and for hiring outside help to ensure that the business complies with the law.
- Seeks to capture non-compliant corporations, but places the burden on compliant small businesses.
National Federation of Independent Businesses (NFIB) is leading the fight to repeal the expanded Form 1099 reporting requirements. Small business owners already face a tremendous expense in complying the with the tax code. In fact, the IRS’ Taxpayer Advocate found that the cost to comply with the new requirement may cost businesses more than any tax revenue raised.
According to an NFIB Small Business Survey tax paperwork is the most expensive paperwork burden ($74 an hour) placed on small businesses by the federal government. NFIB will continue to fight this expensive and burdensome new tax paperwork requirement placed on small business.