CPAS and Small Businesses - Support H.R. 5141
"The Small Business Paperwork Mandate Elimination Act"
Passage by Congress of the national health care legislation had an unintended consequence and possibly its first victim "SMALL BUSINESS IS GOING INTO CARDIAC ARREST!!"
The Law as it now stands requires ALL businesses, beginning in the year 2012, to issue a Form 1099 to any vendor of services or property to which the business has paid more than $600 a year for those services or property. That is correct- all business to business tranactions to anyone, whether companies or individuals must get a 1099! Penalties will be imposed on all businesses that fail to comply with this law.
It is obvious that Washington has no idea what they are doing! They're doing a great job at killing small business. This little item was added to the health care legislation as a revenue generator with little understanding of the consequences.
Now they have decided to go after the underground economy and use supercomputers to cross reference a zillion plus 1099s so that they can find tax cheats. First of all this will never work. Secondly -the paperwork required to accomplish this is unfathomable and will cost more to enforce than the revenue generated.
Here is an example to show you how absurd this law is:
If a small business uses an American Express card to charge items from 200 vendors during the month for gas, meals, office supplies, airline tickets, etc - a 1099 at the end of the year would not be issued to American Express but rather to all the different companies on the monthly statement. Two hundred 1099s would need to be issue to each and every of those vendors the company purchased products or services from . Since the address and Taxpayer Identification Number of each vendor is needed to issue a 1099, every small business will need to send every vendor a W9 form to obtain their Taxpayer Identification Number and receive it back signed. If it is not returned, the vendor will be required to withhold further payment to that vendor.
This is the law. The only group that will benefit from this new law are the accountants! More Billable Hours!!!
This law is so bad that even the Internal Revenue Service on July 1st invited public comment on how to most effectively carry out this law change. The IRS is looking for guidance on how to avoid duplicate reporting and minimize the burden on business. Under "proposed" regulation, business purchases made with credit or debit cards would be exempt from the new reporting requirements.
HELP REPEAL THIS LAW- The CPA Profession has enough work to do. HR5141 has been introduced in Congress to repeal this burden.
Contact your representative ASAP! What do you think?
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4 comments:
I also think this will place an undue burden on all small businesses as well and ultimately on us, the accountants.
Hmm, I'm still not clear. What is the difference in the new law "actual" wording vs old law. It was always my understanding that a 1099 must be issued to individuals and unincorporated businesses for services > $600. So what has changed? In your example, use of a credit card never did allow you to bypass IRS reporting, just facilitate invoicing and payment. I do believe there are many
who pay $600 a year for "services alone" on AMEX but they should have always sent 1099's too. And remember, at least under the old law, this does not apply to products'/materials' purchases.
Not sure I can just yet trust your judgement on this one without knowing more than what was in the lone article. But what I do know, is in the end, it will all work out. As you stated, they are already calling for comments, etc..
I just don't get why everyone is so up in arms about the new requirement, which in my view is much more simple than the current system.
Currently, one has to read tea leaves to determine whether an LLC should be issued a 1099--whoever fills out those W-9's simply cannot read English. It's much easier to issue a 1099 to everyone. Anyone who practices in this area knows that clients need to be advised that there needs to be internal controls in place so that they receive the W-9 before payment is made--regardless of the amount. It's common sense.
Also, I'd like to point out that the current requirement to issue 1099's for payment card transactions is finally going to be passed onto the banks by 2012. The IRS has already stated that there will not be a duplicate 1099 reporting requirement for payment card transactions.
So, the simplest solution for small businesses that want to avoid the 1099 reporting requirement is to pay using a payment card whenever the option is available. Most payees now days accept payment cards--and most small businesses have credit cards and/or check/debit cards.
Thanks For Sharing.....
Nice Small Business thoughts and tips added by you...............
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