On November 29th, the Senate rejected two proposals to repeal expanded Form 1099 reporting requirements for businesses that was enacted as part of the Patient Protection and Affordable Care Act (PPACA). A measure proposed on November 15th by Senate Finance Committee Chairman, Max Baucus, D-Mont. failed, since it was not offset by other spending cuts or tax increases. The Baucus proposal was defeated by a 44-53 margin. Senator Mike Johanns, R-Neb., proposed revenue offsets, but the measure was rejected by a vote of 61-35. Johanns argued that the Baucus amendment would further add to the deficit.
The expanded Form 1099 requirements mandate that all businesses file a return for payments in excess of $600 to all vendors, including previously exempted corporations, beginning in 2012. The new 1099 filing requirement was instituted to raise an additional $19 billion over 10 years to help offset the cost of health care reform.
Small businesses strongly oppose the new provision because of the excessive paperwork burden and compliance cost placed upon them. Democrats argue they will continue to stand up for small businesses and will work to resolve the 1099 issue. Republicans also want to repeal the 1099 requirements, but they want the repeal paid for so that it does not add to the deficit. This issue appears to be a political football that will continue to be tossed back and forth during the remainder of this lame duck session of Congress. Like the tax rate debate, this issue needs clarity soon so that businesses do not waste valuable resources responding to the dilemma of an "on again, off again" 1099 filing requirement.
Schneider Downs provides accounting, tax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.