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"Costly IRS Mandate Slipped into Health Bill

Published:

Last Edited: May 3, 2010, 9:12 am

"Costly IRS Mandate Slipped into Health Bill

Posted by Chris Edwards
Source Cato@Liberty

"Most people know about the individual mandate in the new health care bill, but the bill contained another mandate that could be far more costly.

A few wording changes to the tax code’s section 6041 regarding 1099 reporting were slipped into the 2000-page health legislation. The changes will force millions of businesses to issue hundreds of millions, perhaps billions, of additional IRS Form 1099s every year. It appears to be a costly, anti-business nightmare.

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.

In a recent summary, tax information firm RIA notes the types of transactions covered by the new 1099 rules:

The 2010 Health Care Act adds “amounts in consideration for property” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(1)) and “gross proceeds” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(2)) to the pre-2010 Health Care Act categories of payments for which an information return to IRS will be required if the $600 aggregate payment threshold is met in a tax year for any one payee. Thus, Congress says that for payments made after 2011, the term “payments” includes gross proceeds paid in consideration for property or services.

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.

Tax CPA Chris Hesse of LeMaster Daniels tells me:

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.

There appears to have been little discussion before this damaging mandate was slipped into the health bill and rammed through Congress, but a few business groups did raise concerns. Here’s what the Air Conditioner Contractors of America said:

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.

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.

For what purpose? So the spendthrift Congress can shake a few extra bucks out of private industry? The business sector is the generator of America’s high living standards, but most federal legislators just see it as a kitty to be raided or a cow to be milked dry.

I’m stunned that there wasn’t a broader debate before such a costly mandate was enacted. If it goes into effect, it will waste vast quantities of human effort in filling out forms, reworking computer systems, collecting and organizing data, and fighting the IRS. The struggling American economy can’t afford anymore suffocating tax regulations. This mandate is a giant deadweight loss. It should be repealed."

http://www.cato-at-liberty.org/2010/04/26/costly-irs-mandate-slipped-into-health-bill/

Entry #1,784

Comments

1.
JAP69Comment by JAP69 - May 3, 2010, 10:06 am
They are setting in place a method to track the underground economy for taxation. Multi billions are lost yearly by slick bookkeeping from buisnesses as well as individuals.
2.
konaneComment by konane - May 3, 2010, 10:26 am
Thanks JAP! Also understand many companies are doing direct deposit rather than issuing checks as another means of tracking.

Why don't they enact the Fair Tax, abolish all federal income taxes and other forms of taxation, nix the VAT tax and be done with it instead of so much tracking???? Too simple and guess it puts too much power in the hands of the people whose pockets continually get hoovered.
3.
Comment by crow - May 3, 2010, 10:36 am
The Obama administration is turning into a complete nightmare....first the Acorn fiasco then the health care bill now more IRS intervention into our lives when will it ever end?This clown cant even patrol our borders and keep out invaders that displace American workers....and you'd think with 10% unemployment someone would do something but they're not this is what happens when the masses are blinded with media driven mind numbing "LIBERAL Fanatacism".....

What the helll is wrong with keeping your own hard earned money I mean hellll those idiots in Washington are gonna turn around and spend it in some third world toilet of a country where people have yet to discover how to use a condom to prevent the spread of aids..

Why should we allow the IRS to have that much control over our lives to begin with,this is complete insanity....

We need real leadership in Washington for a "CHANGE"...!

(Sarcasm included)
4.
konaneComment by konane - May 3, 2010, 10:58 am
Thanks Crow! We the people, not we the subjects, need to elect CONSERVATIVES and keep their feet to the fire for some real change. Many laws need to be repealed, executive orders rewritten, government shrunk and people put to work at private sector jobs.

We've been headed to where we are for years thanks to apathetic voters who wrung their hands rather than educate themselves about elected officials. Many of us were warning this is the wrong direction but nothing was done because people were not moved out of their comfort zones .... kinda like frogs in a pot. Now that we smell ourselves cooking let's just hope it's not too late.
5.
sully16Comment by sully16 - May 3, 2010, 1:48 pm
My check is direct deposited, company rules..we put what we need in checking and the rest comes out and goes into 750 lb. gun safe, after our 401ks were devasted we had to rethink life, we are getting small amounts back but, will that money be there in 20 years , and, how will it be taxed. we didn't go crazy over y2000 or 2012 predictions, but we seriously decided to learn real survival skills. we have a 6 month supply of food and water and we have seeds , if we both end up out of work ..we have a plan and we have our cash. my whole point is ...don't sit around waiting to be rescued , in the mean time lets get these people out of washington.
6.
konaneComment by konane - May 3, 2010, 1:59 pm
Thanks Sully! The sooner we vote them out the better! Knowing Granny Clampett's skills of gardening, canning, 50 way to cook varmint might come on handy as things continue to plummet out of control.
7.
konaneComment by konane - May 3, 2010, 2:01 pm
come * in * handy I meant.

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