Written By: Neil deMause of the Heartland Institute
An until-now unnoticed provision of the new health care overhaul law could change the way U.S. businesses—including freelance workers—prepare for tax day, causing an avalanche of additional record keeping and reporting.
According to Section 9006 of the 2,409-page Patient Protection and Affordable Care Act, beginning on January 1, 2012 all businesses will have to issue 1099 tax forms not just to contractors but to any individual or corporation from which they buy more than $600 in goods or services in a tax year. Currently 1099s need only be issued to individuals, not corporations.
The requirement will now include items such as shipping charges, hotel bills, and equipment purchases, all currently exempt from 1099 reporting.
While the notion of sending a tax form to Costco for every large purchase may seem absurd to small business owners, that’s not the worst of it, says Marianne Couch, a principal with the Cokola Tax Group in Michigan and former chairwoman of the IRS Information Reporting Program Advisory Committee’s subcommittee on small business and self-employed tax issues.
Names, Numbers for Everything
“It’s not so much the increase in the 1099s that will be the primary issue—although that certainly will mean, most notably in first year, significantly higher numbers of pieces of paper going out through the mail,” she says. Rather, she says, the biggest headache is likely to be data collection—gathering names and taxpayer identification number information for every payee and vendor that we do business with.
Finish reading the article at Heartland.org.