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* Health Care 1099 Reform Fails *

John Peterson. LICA Director of Government Relations, 18 SEPTEMBER 2010

After all the hope I had that the Senate might actually reform the provision in the Patient Protection and Affordable Care Act, the newly passed health care law (and like many bills lately is certainly misnamed) the mandate that businesses send out tax forms for purchases totaling or exceeding $600, the Senate yesterday failed to approve either of the two bills seeking repeal.

Legislators failed to get the 60 votes required to pass either a Republican bill to overturn the provision, or a Democrat bill seeking to exempt businesses with fewer than 25 employees and raise the amount of purchases to a minimum of $5,000.

Purchases using credit cards are excluded. The provision, which won’t go into effect until 2012, was added to raise an estimated $17 billion over a decade to help cover the increased costs of expanding health care under the new law. Did someone say the new law would lessen costs?

Currently businesses must issue 1099 forms to contractors or freelancers whom they pay more than $600. That requirement will now extend to goods for any size company as the mandate now stands. Presently businesses have to tell IRS the value of services they buy from vendors.

This is going to take a significant amount of time and effort, particularly for small businesses such as many LICA members have. It will also affect my small engineering and consulting firm. Most of us don’t have the staff to dedicate the time to get this up and running. This provision will be a significant issue because businesses will have to track down tax information first to send the 1099 form to the vendors or businesses they buy from. It will impose substantial paperwork and reporting burdens on the backs of small businesses. All this to improve the economy? Someone explain this to me.