Free Markets, Free People


More goodies found in ObamaCare

Since no one apparently read – or had the time to read – the ObamaCare bill before it was passed into law, parts of it are just now coming to light that, to most, are going to be a surprise. For instance, a mandate having very little to do with health care but certainly a very costly tax mandate for business was slipped into the bill. Maybe this is why those additional 16,000 IRS agents are needed:

Under current law, businesses are required to issue 1099s in a limited set of situations, such as when paying outside consultants. The health care bill includes a vast expansion in this information reporting requirement in an attempt to raise revenue for an increasingly rapacious Congress.

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Basically, businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a hell of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.

As one CPA notes:

Under the health legislation, the IRS could be receiving billions of more documents. Under current law, businesses send Forms 1099 for payments of rent, interest, dividends, and non-employee services when such payments are to entities other than corporations. Under the new law, businesses will be required to send a 1099 to other businesses for virtually all purchases. And for the first time, 1099s are to be sent to corporations. This is a huge new imposition on American business, costing the private economy much more than any additional tax that the IRS might collect as a result.

This mandate will generate new compliance costs which will, as the CPA notes, cost businesses “more than any additional tax that the IRS might collect as a result”. As little as $600 in business supplies generates a 1099. It is no longer limited to the categories listed above, but to the size of the purchase. The practical fallout?

The House bill would extend the Form 1099 filing requirement to ALL vendors (including corporate) to which they pay more than $600 annually for services or property. Consider all the payments a small business makes in the course of business, paying for things such as computers, software, office supplies, and fuel to services, including janitorial services, coffee services, and package delivery services.

In order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold on your payments.

As Chris Edwards at CATO notes:

Private transactions are the core of a market economy, and the source of America’s growth and prosperity. Now the federal government is imposing a vast new web of red tape on perhaps billions of these growth-generating private exchanges.

If it were me I’d be figuring out how to make a whole bunch of $599 purchases, but that’s not the point, of course. This mandate and imposition on business is going to require a huge effort toward compliance and cost a lot of money. It’s just another reason for a business to postpone hiring because the money they were going to put toward a new employee is now shifted to the compliance requirement.

This is how government interferes in the economy in a non-productive way and ties up money that would otherwise be put toward productive economy and job expanding use.

~McQ

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12 Responses to More goodies found in ObamaCare

  • Could this compliance requirement be a set up step for a VAT?

  • sounds like a VAT system but without the efficiency.

  • Well, this is what we get when we elect a lot of fools who’ve never worked an honest job in their lives. 

    My guess is that some idiot staffer – who has also never worked an honest job – was tasked to determine how Uncle Sugar can raise more cash.  Th change to the tax code seems like a natural: make companies report more of their expenditures so that Uncle Sugar can get his cut.  Because the staffer, his boss, and the rest of the thieves on Capitol Hill have no idea how a business actually functions (outside of greedy bosses sitting on huge piles of cash in their offices like Smaug sitting on his hoarde while oppressing their non-union workforce), it was impossible for them to comprehend much less foresee the destructive effects of the new law.  But what do they care?  So long as their gold-plated health benefits and retirement funds are intact, so long as they get their automatic payraise every year, so long as they have huge staffs to kowtow to them, so long as they can lord their lofty station over virtually everybody in the country (“call me SENATOR!”), what do they care how much common American prole suffer?

    If the GOP doesn’t make every effort to either repeal this monstrosity or at least starve it of funds if they gain control of the Congress in the mid-terms, then they deserve not only to NEVER get a single vote again, but to be run out of town on a rail (the more I think of it, the more convinced I am that our forebears had rather more effective ways than we have today of expressing disapproval!)

  • There is no way this mandate isn’t repealed.  This is unbelievable.  It will absolute destroy small businesses.

  • I pay a lot of my company’s bills via credit card.  Am I going to have to issue 1099s to those vendors, or only those paid with a check?
    A step further: If I pay a company bill with my personal credit card and get reimbursed for it, to whom do I issue a 1099?

    • There’s a bit of ambiguity in the last sentence above, so let me rephrase I’m the company accountant.  If I pay a company bill with my personal credit card and get reimbursed for it, to whom does the company issue a 1099?

      • Well, I’d suppose the company has to issue you a 1099 and then (if you’re also a business) you have to issue the bill-payee a 1099, because in the event that you didn’t use the reimbursement money to pay off the credit card, it would count as income for you.  So every reimbursement type situation would generate not one, but two 1099 forms.  I think.

  • This is in-frickin’-sane.  It’s even worse because it’s $600 ANNUALLY not $600 in any given transaction.  So microbusinesses like mine will require a MAJOR step-up in accounting, because it’s not enough that we know how much we spent in supplies, we now have to know how much we spent at each supplier.  Can you just imagine all the 1099s that’d be coming in to places like Staples from tiny little businesses that spend $60 a month on office supplies??

    • You are going to have to save all those receipts and sort them not only by category but also resort them again by supplier. I have no clue how you have to store them so they will be available for the inevitable audit.

      Think of the poor  restaurant owner. Buying the same item (produce, for example) from several different suppliers, canned goods from several completely different suppliers who may also sell other products, …..
      My mind boggles at the potential number of these forms that will be created by just one business. I thought making out W-2 forms was bad, but this will require paying for at least the equivalent of a part-time bookkeeper just to keep track of the 1099s for one medium-sized restaurant. Not to mention storage costs for the years of records and receipts.