Health reform means more paperwork for small biz...

Health reform means more paperwork for small biz

Posted in: Finance, Legal & Compliance, Special Report

Buried in the new health act is a measure mandating that you issue 1099s — lots of ‘em — to many vendors, not just contractors.

As your A/P people certainly know, a Form 1099 is used almost exclusively to document payments to contract workers. Make that it was used almost exclusively for contract workers. As of 2012, businesses
will have to issue a 1099 to just about any vendor for goods or
services totaling more than $600.

Consider the possibilities of how the law will work in practice:

• You buy a new computer for your business from a store. You’ll have to 1099 the store.
• You buy the computer online from Apple’s Web site. You’ll have to 1099 Apple Corp.
• A local office-supply outlet delivers computer-printer paper to your business. As soon as the purchase amount hits more than $600, you’ll have to 1099 the outlet.
• You hire a plumber to come in and do repairs in your building. The bill comes to more than $600. You’ll have to 1099 the plumber.

It’s easy to see how the transactions could number into the hundreds, even thousands, in a typical year.

a. Why the change?

b. Why is it part of healthcare reform?

The answers:

a. The IRS wants more ways to track revenue, because the agency believes it’s missing out on $300 billion in unreported income.

b. Included in the health bill are changes aimed at raising the money needed to fund reform. The 1099 stipulation is one of those changes.

There’s some legislation being floated in Congress right now targeted at repealing the 1099 requirement. If no repeal gets passed, the new law will cover any transactions that take place after December
31, 2011.

Source: BusinessBrief.com