A clause buried in the Health-Care bill requires more tax forms—and small business will bear the brunt.
A provision, inserted by Democrats on the Senate Finance Committee to help offset the cost of the Health-Care bill, requires companies to report to the IRS payments of more than $600 a year to any vendor. The intent is to capture $2 billion or more a year in taxes on income that currently goes unreported by contractors and small businesses.
Today, businesses must file 1099-MISC forms only for freelancers and other service providers that aren’t incorporated. The new rule, set to take effect in 2012, will expand such reporting to include payments to companies, and for goods as well as services. That means businesses will need to get tax ID numbers and file forms for almost all suppliers—and track all their small expenses to see which vendors meet the threshold. The National Small Business Assn. estimates that the average company will have to file 95 of the forms under the measure, up from fewer than 20 today.
It is generally acknowledged that small business is the engine of growth for our economy and the one sector we should be able to count on for getting us out of our current economic doldrums. So why does government think they can continue to add additional reporting burdens on this sector and continue to sap their energy and vitality?
