Just Spent $600? Must Tell IRS. It’s a New “Health Care” Rule

The Cato Institute brings word of yet another “health care” nightmare mandate, this one for small businesses and their customers. Neatly tucked into the ObamaCare bill are “a few wording changes” to the tax code that mean that 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.  [emphasis mine]


Tax CPA Chris Hesse of LeMaster Daniels tells me:

. . . 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.

The author of this Cato post, Chris Edwards, goes on to ask: “For what purpose? So the spendthrift Congress can shake a few extra bucks out of private industry?”

I think not.

Rules like this put so much booking pressure on Mom and Pop businesses that they’ll be making even less income. Congress may not believe it, but entrepreneurs do not go into business for love of paperwork, or even to give the IRS a chance to breathe down their necks quarterly–tempting as that might sound–but to perform the services to society that they are actually good at, have trained for, and like to do, like selling clothing, hardware, or toys; designing houses or technologies; styling hair; raising roses, tomatoes, or dairy cows; or repairing cars or furnaces. Mountains of government-required paperwork severely cut into the time small business people, with loads to do and limited–or no–staff, can spend doing what they went into business to do in the first place, and leaves precious little time left for planning ways to improve the business for growth–or even to hire that unemployed person that Congress wants us to think they care about.

Taking Congress’s actions at face value, there are few other conclusions to draw than that Congress wants to put small businesses out of business.

Too bad for Congress. Even they will miss small businesses when they’re gone.

Hat tip: Cartago Delenda Est.

More at Bread upon the Waters.