Health Care’s Hidden Headache: More 1099 Forms on Tap

I'm leaching this article 100% from the Society of American Florists newsletter since it's so well written and too important to not share.

Health Care’s Hidden Headache: More 1099 Forms on Tap
By Drew Gruenburg
SAF is working on Capitol Hill to repeal the law that would mandate that all business owners issue more 1099s for what they buy from vendors.

As part of the health care reform law, beginning Jan. 1, 2012, small businesses must issue 1099 forms to individuals or companies from whom they purchase more than $600 worth of goods or services. Under current rules, most payments to corporations are exempt from 1099 reporting requirements; the form is mainly used to report money paid to independent contractors or freelancers for services.

Business owners will also have to get a Taxpayer Identification Number (TIN) from all vendors. Without a TIN, businesses can withhold payment.

Under the new law, 64 percent of respondents to an SAF survey anticipate issuing 50 or more 1099 forms. Under existing law, 4 percent of respondents currently issue 50 or more 1099 forms.

Rep. Dan Lungren (R-3-CA) has introduced H.R. 5141, The Small Business Paperwork Mandate Elimination Act, to repeal the new requirement.

“SAF supports this bill and will work toward its passage,” said Jeanne Ramsay, SAF’s senior director of government relations. “But also, through SAF’s participation in coalitions, meetings have been held with the Treasury Department and the Small Business Administration to explain the impact on small businesses.”

Here are some examples of situations in which a business will have to issue a 1099 to the appropriate vendor (for expenses exceeding $600), beginning in 2012, unless the law is repealed:

    * space rentals from a corporate landlord
    * educational seminars hosted by a corporation
    * inventory purchases from a supplier
    * trade show lodging at a corporate hotel
    * business airfare
    * holiday parties held at a restaurant operated as a corporation,
    * office supply purchases for copier ink and paper
    * gas station purchases

Businesses must file a 1099 once it once the expense exceeds $600 during a calendar year.

This new law was put into place to help pay for the cost of health care reform and to help ease the “tax gap” — the gap between what is supposed to be paid in taxes to the IRS and what the IRS is actually collecting. Some estimate the tax gap is $350 billion a year.

H.R. 5141 currently has 71 cosponsors and has been referred to the House Ways and Means Committee.