OUR THOUGHTS ON:

Bill to Repeal Form 1099 Reporting Requirements for Payments to Corporations Moves Closer

Tax

By Ron Kramer

Ahead of President Obama’s State of the Union Address on January 25, Senate Finance Committee Chairman, Max Baucus (D-Mont.), and Senate Majority Leader, Harry Reid (D-Nev.), introduced the Small Business Paperwork Mandate Elimination Act of 2011, a bill to repeal the new Form 1099 reporting requirements for payments made to corporations, scheduled to begin in 2012. The bill would repeal Section 9006 of the Patient Protection and Affordable Care Act and its amendments to the Internal Revenue Code instituting the 1099 reporting requirements for payments made to corporations for goods and services beginning in 2012. The new 1099 requirements had been inserted to help raise revenue for the new health care legislation.

The new 1099 reporting requirements for 2012 have been decried by small businesses and tax-exempt organizations as having burdensome and time-consuming paperwork requirements. In introducing the bill, Senator Baucus said, “We have heard small businesses loud and clear and are responding to their concerns. Small businesses need to focus on creating good-paying jobs – not filing paperwork. Many of my colleagues on both sides of the aisle want to work with the small business community to eliminate these requirements, and it is my hope we can come together to pass legislation quickly.”

In his State of the Union address, President Obama indicated his willingness to repeal the new 1099 rules as part of “improving” rather than repealing the new health care law. President Obama stated, “So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”

Republican efforts to repeal the entire health care law with the 1099 requirements in it face an uphill battle, with President Obama holding ultimate veto power. Accordingly, the 1099 repeal may be the first piece of legislation aimed at replacing the law on a piecemeal basis and would be welcomed by large and small businesses alike. Quick passage will serve to reduce wasted time and resources that might otherwise be devoted to compliance efforts for the new rules in 2012. 

For further information, please contact Ron Kramer, Tax Advisory Services, at (412) 697-5356 or rkramer@schneiderdowns.com.

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