Weren't We Told Health Care Reform Would Contain Costs?

[Conan71]

Um, that particular provision was publicized prior to passage of the bill.

Honestly, I think they're being somewhat ridiculous about it. It would be trivial for any small business accounting package to generate the necessary 1099s. There would be a burden initially as companies obtained tax ID numbers from everyone they pay and enter the information in, but going forward, it's not really an issue, nor would it be for any new payees. And at this point, if you're not using QuickBooks or something similar and you have an accountant, you're probably paying more for the accountant's time every year than you would on a QB license.

Amendment didn't pass. The story says Nelson claims the Johanns amendment would have "gutted the reform bill".  With all the sausage-making on the Hill who knows what else was stuck in there.

"The Senate in a series of procedural votes chose not to move forward on two amendments that sought to completely or partially repeal a new tax reporting provision in the new health reform law.

Respective amendments offered by Sens. Mike Johanns (R-Neb.) and Bill Nelson (D-Fla.) each sought a different solution for paring down the reform law's 1099 provision, which in 2012 will require any business that purchases more than $600 worth of goods or services from another business to submit a 1099 tax form to the Internal Revenue Service.

The requirement is expected to save $17 billion over 10 years, but certain lawmakers and business trade groups have called for its repeal, claiming it would put a huge tax burden on small businesses. "Even the White House now admits they went too far and their mandate will hurt small businesses," said Senate Republican Leader Mitch McConnell (R-Ky.), who supported Johanns' amendment to completely repeal the reporting requirement.

Nelson, who had suggested exempting businesses with 25 or fewer employees from the requirement, argued that Johann's approach would "gut the reform bill" in order to pay for the repeal.

Neither amendment achieved the 60 votes necessary to proceed to a final vote for possible inclusion in the "Small Business Jobs and Credit Act of 2010," which is still under consideration in the Senate"

http://www.modernhealthcare.com/article/20100914/NEWS/309149984/0

[nathanm]

The requirement is expected to save $17 billion over 10 years, but certain lawmakers and business trade groups have called for its repeal, claiming it would put a huge tax burden on small businesses.

Wow, that's a new one on me. Small businesses will be hurt because they have to pay the tax they owe. That's pretty ballsy, arguing that the new 1099 requirement will make ongoing tax fraud harder is a reason to repeal the requirement.

As I mentioned before, I don't really care either way. I can pretty easily make my "accounting" software tally my spending with each payee and generate the 1099s. What I don't know is how much the IRS will like having to sort through the mountain of paper that will be coming their way in early 2013.

[Conan71]

Here's some better, or at least somewhat more detailed information on it:

"Two separate amendments introduced by Senate Democrats and Republicans to the Small Business Jobs Act were unable to reach the 60-vote threshold needed to cut off debate on Tuesday and be included in the final bill. One amendment, introduced by Sen. Mike Johanns, R-Neb., would have repealed the provision, but would have made more people exempt from having to buy health insurance by lowering the affordability exemption for the individual mandate. The amendment was defeated on a procedural vote of 46-52.

The Democratic alternative, introduced by Sen. Bill Nelson, D-Fla., would have increased the threshold for reporting the purchases on a 1099 from $600 to $5,000, and exempted businesses with 25 or fewer employees from the new reporting requirement. His amendment was defeated on a vote of 56-42, also failing to reach the 60-vote threshold.

The Senate may next try to pass the 1099 repeal as a separate piece of legislation. Earlier efforts to pass the 1099 repeal before lawmakers left for their August recess have also failed to pass in the House (see Small Business Tax Relief Act Fails to Pass in House).

The Obama administration is asking to scale back, but not repeal, the requirements. Treasury Secretary Timothy Geithner and Health and Human Services Secretary Kathleen Sebelius sent a letter Monday to Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ken., urging them to scale back the new 1099 requirements.

"We are committed to reducing the gap between taxes legally owed and taxes paid," they wrote, according to Politico.com. "However, the administration believes that the burden created on businesses by the new information reporting requirement on purchases of goods that exceed $600, as included in Section 6041 of the Internal Revenue Code as modified by Section 9006 of the Affordable Care Act, is too great." They said they opposed the Johanns amendment because it would withhold money from a new fund for wellness programs until 2018.

Johanns blamed Democrats for the defeat of his amendment. "Regulations, mandates and government spending simply will not create jobs," he said in a statement. "Today's vote signifies that Senate Democrats and the Obama administration would rather protect a section of their more than 2,400-page unpopular health care bill than stand up for small businesses. It is wrong to have paid for the president's health care plan on the backs of small businesses. My amendment would have truly helped small businesses and I am committed to continuing this fight until this provision is repealed."'

http://www.webcpa.com/news/Senate-Fails-Repeal-1099-Requirements-55560-1.html

[guido911]

Sounds like the party of "NO" (to small business) is at it again.

[nathanm]

Sounds like the party of "NO" (to small business) is at it again.

You come up with that one yourself?

I can't believe Johanns is still claiming that reducing tax fraud is somehow punishing small businesses. I guess he thinks it's OK if you cheat on your taxes, as long as you're "running a small business?" The health care bill isn't paid for by new taxes on small businesses. In fact, Democrats have passed legislation to reduce their tax burden. This entire controversy is ridiculous.

[Conan71]

You come up with that one yourself?

I can't believe Johanns is still claiming that reducing tax fraud is somehow punishing small businesses. I guess he thinks it's OK if you cheat on your taxes, as long as you're "running a small business?" The health care bill isn't paid for by new taxes on small businesses. In fact, Democrats have passed legislation to reduce their tax burden. This entire controversy is ridiculous.

It's not registering with me where this cuts tax fraud, nor where they expect this will gain $1.7 bln in revenue every year. What's the cost of having the IRS compile and track all this new information?  I can't imagine the net gain would be all that great.  People who are dealing in cash to avoid paying taxes will continue to do so. 

[nathanm]

It's not registering with me where this cuts tax fraud, nor where they expect this will gain $1.7 bln in revenue every year. What's the cost of having the IRS compile and track all this new information?  I can't imagine the net gain would be all that great.  People who are dealing in cash to avoid paying taxes will continue to do so. 

With the 1099 being required, both sides of the covered transactions must be complicit in the tax fraud to pull it off, rather than only the recipient of the payments. It works in the same way that filing 1099s for contractors or banks reporting interest on 1099-INT or the W-2 does.

The limit seems a little intrusive to me because it's only $600, but the fundamental concept is sound.

[Gaspar]

With the 1099 being required, both sides of the covered transactions must be complicit in the tax fraud to pull it off, rather than only the recipient of the payments. It works in the same way that filing 1099s for contractors or banks reporting interest on 1099-INT or the W-2 does.

The limit seems a little intrusive to me because it's only $600, but the fundamental concept is sound.

We have clients clamoring to update their software because of changes to the 1099 and W-2s. Some are requesting custom programing for their existing software revisions, and others are updating to new revisions that handle the additional fields. 

We have a group of clients that just left for an accounting convention in Springfield, MO.  The main gist of the convention is changes in the tax code.  The main frustration they all have is the "limbo" they are now facing when it comes to Q4 planning.  Typically by now everyone knows most of the important changes and requirements for the upcoming year, but as I keep hearing from them, they are not yet sure what reporting will be necessary, or what has yet to be passed or repealed. Most don't know what they need to start reporting as part of the healthcare bill, because there is apparently differing opinions on tax stratagies.

I'm very interested to find out what they discover, because ultimately it will have an impact on my business since we have to make all of the changes to their systems and consult with their accounting departments.

It's job security for me, but ultimately it's a burden on the client that produces no return. 

I don't know, but the new 1099 requirement may cost the government more from an audit standpoint than it is capable of returning.  It certainly places a new tax burden on companies, and increases their overhead.  Stupid in a stalled economy with almost 10% unemployment!

[nathanm]

It's job security for me, but ultimately it's a burden on the client that produces no return. 

I don't know, but the new 1099 requirement may cost the government more from an audit standpoint than it is capable of returning.  It certainly places a new tax burden on companies, and increases their overhead.  Stupid in a stalled economy with almost 10% unemployment!

My understanding is that the new 1099 requirement doesn't kick in until 2012. That seems like plenty of time to me. Also, collecting taxes owed but not being paid is not a "new tax burden" by any reasonable definition of "new." It would be more accurate to say that they are subject to new enforcement efforts and new reporting requirements. If they've been paying tax correctly all along, their only worry is getting their accounting system updated.

[Conan71]

I get your point, but how is the gov't calculating this as a $17bln windfall with such certainty? Other part is, what does a company like Office Depot do with hundreds of thousands of 1099's all the sudden?

[nathanm]

I get your point, but how is the gov't calculating this as a $17bln windfall with such certainty? Other part is, what does a company like Office Depot do with hundreds of thousands of 1099's all the sudden?

A company like Office Depot does what they do for everything else: outsource. I have a sneaking suspicion ADP will be expanding soon.

I don't know where they're getting the specific savings number. Without knowing more, I'd regard it as an educated guess by some IRS people. Various government agencies collect sales data for all sorts of goods and services, so I can envision there being at least some data on which to base their estimate.

[Gaspar]

I get your point, but how is the gov't calculating this as a $17bln windfall with such certainty? Other part is, what does a company like Office Depot do with hundreds of thousands of 1099's all the sudden?

More like millions.   Most small retailers that will be responsible for hundreds of thousands.  Office Depot will be in the millions.  So will most billion dollar cap businesses that sell things.

[nathanm]

Office Depot has millions of suppliers? Really?

[Conan71]

A company like Office Depot does what they do for everything else: outsource. I have a sneaking suspicion ADP will be expanding soon.

I don't know where they're getting the specific savings number. Without knowing more, I'd regard it as an educated guess by some IRS people. Various government agencies collect sales data for all sorts of goods and services, so I can envision there being at least some data on which to base their estimate.

Basically, it would ride on the premise that companies chronically under-report their sales, especially cash transactions. 

Here's what I don't like- this cavalier attitude that businesses should simply be able to shoulder the costs of more regulations and compliance just because the Feds want them to.  Your solution is "ADT".  That comes with a cost.  I suspect compliance cost and enforcement cost will way out-strip the benefit of what will ultimately be collected.

I personally think this was a schlocky method to try and show in the accounting of the HC bill how it could be paid for.  Companies under-reporting sales revenue is a different issue entirely and should be dealt with via separate legislation if this is such a problem.  There's a whole secondary economy out there which is untaxed, this is but a very small part of it.  A simplification in tax code (i.e. consumption-based tax like the "Fair Tax"...and before someone shouts "regressive" read up on it, it's not) would end a lot of the shenanigans people pull to avoid paying taxes.  But that's a discussion we've beat to death on other threads and I don't care to dredge it back up here.

[Conan71]

Office Depot has millions of suppliers? Really?

No Nathan, they are a supplier to millions, that means a 1099 coming in from every business which buys $600 worth of goods.  Only $50 a month.  They have to open, properly file, and store these 1099's.