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Obama-Care Requires Millions More 1099s

From CNN’s Money.Com:

Health care law’s massive, hidden tax change

By Neil deMause, contributing writer

May 5, 2010

NEW YORK (CNNMoney.com) — An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.

Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.

Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.

The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.

Taken together, the two seemingly small changes will require millions of additional forms to be sent out.

"It’s a pretty heavy administrative burden," particularly for small businesses without large in-house accounting staffs, says Bill Rys, tax counsel for the National Federation of Independent Businesses

This is a full employment act for accountants. Meanwhile, Mr. Obama pretends that he is trying so hard to help small business.

Why did these tax code revisions get included in a health-care reform bill? Welcome to Washington. The idea seems to be that using 1099 forms to capture unreported income will generate more government revenue and help offset the cost of the health bill

The new rules could drastically alter the tax-reporting landscape by spotlighting payments that previously went unreported. Freelancers and other independent operators typically write off stacks of business expenses; having to issue tax paperwork documenting each of them could cut down on fraudulent deductions.

More significantly, the 1099 trail would expose payments to small operators that might now be going unreported. If you buy a computer for your business from a major chain retailer, the seller almost certainly documents the revenue. But if you buy it from Tim’s Computer Shack down the street, Tim might not report and pay taxes on his income from the sale.

The IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported. Using 1099s to document millions of transactions that now go untracked is one way to begin to close the gap

Now we know why they are hiring so many more IRS agents.

Never mind that these new requirements would be outrageously burdensome they would be practically impossible to follow. (Like so many of our tax laws.)

The notion of mailing a tax form to Costco or Staples each year to document purchases may seem absurd to small business owners, but that’s not the worst of it, tax experts say.

Marianne Couch, a principal with the Cokala Tax Group in Michigan and former chair of a citizen advisory group to the IRS on small business and self-employed tax issues, thinks the bigger headache will be data collection: gathering names and taxpayer identification numbers for every payee and vendor that you do business with

When you think about it, these new requirements could also serve as a very handy bridge to a VAT tax — which is surely coming.

In fact, it probably shows that the VAT tax was already in the back of the Democrats’ minds when the ‘healthcare reform’ bill was being cobbled together in the first place.

This article was posted by Steve on Thursday, May 6th, 2010. Comments are currently closed.

15 Responses to “Obama-Care Requires Millions More 1099s”

  1. mr_bill says:

    There seems to be a giant problem with this law: Hypothetically, if I send a 1099 to Office Depot, for example, and it states I purchased $2000 worth of goods/services, how in the world is Office Depot ever going to figure out if that is legitimate, especially if I make cash purchases (or claim that I made the purchases with cash)? It seems to me that this law might actually offer a vehicle for people to manufacture tax deductions. I know that liberals don’t want anybody other than liberals cheating on their taxes. What are they going to do?

  2. proreason says:


    A flood of paperword is another form of Cloward-Piven, isn’t it.

    The organizaer never rests.

  3. NoNeoCommies says:

    Why don’t they just audit Obama’s people, the Congress and their staffs and all the Bureaucrats earning more $100K in DC?
    Catch all those tax cheats and you can likely make up that ‘lost’ revenue.

  4. Mithrandir says:

    “The IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported.”

    Like all those undocumented workers who:

    ~Didn’t pay for a passport
    ~Didn’t pay for a work Visa
    ~Didn’t pay for an alien registration card
    ~Didn’t report income tax
    ~Didn’t file a tax return

    You mean THOSE unreported billions of $ missing and leaving the country?

    • NoNeoCommies says:

      Unfortunately, too many DO file false returns claiming earned income credit, child credit, etc. using taxpayer identification numbers instead of SSNs or someone else’s SSN.

    • mr_bill says:

      If the IRS is worried about all that lost tax revenue, how about a 100% tax on money earned in America and sent to Mexico. It will now cost a dollar to send a dollar to Mexico. Maybe that will address some of the problem. Western Union can begin collecting and remitting this tax immediately.

  5. BannedbytheTaliban says:

    Just another overly burdensome law that no one could possible follow and the regime will use to punish dissent. We are moving faster and faster to a third world dictatorship every day.

  6. fallingpianos says:

    Did they even bother to do an environmental impact study beforehand?

  7. Dupree says:

    Not that this is news to anyone at S&L, but the truth is finally being publicized in regard to the true nature of this health “reform”:


    • proreason says:

      Yeh, the true nature is to drive Health Insurance companies out of business so that the government is the Single Payer.

      That was the goal all along.

      While Obamy was breathing, he was lying about it….of course.

      After the private industry is demolished, then they will begin to ration care….or more properly, redistribute care from white people who worked for decades to earn enough to have it in their old ages, to people who don’t like to work.

      Then the early deaths will begin.

      It looks like it will happen in just a few years, by design.

    • Rusty Shackleford says:

      As well as destroy small businesses.

  8. BigOil says:

    A stimulus package for the IRS.

    The IRS is in a race with the EPA to see which government agency can drop the biggest anchor on the US economy.

    • proreason says:

      Notice also that the collection of 1099’s is work that even 8 year old slackers can do.

      Did BigOil Inc sent in 1099’s this month. Check.

      Did the businesses BigOil Inc send 1099’s to this month also send in 1099’s. Check.

      Do the numbers match. Check.

      Generate form letter if no match. Check.

      That should be worth about $79K a year, before platinum benefits and sick time.

      Redistribution on a stick.

  9. xdannyh says:

    lets see now: I want to sell a 1/2 ounce of gold, now that company will have send a 1099 to the IRS if I read the article correctly. when I don’t declare that makes me a tax cheat or actually a main stream democrat.Pardon the humor?!. The intent of the law, hidden in the “health reform” bill is to make any transaction of over $600 an Irs reportable offense. Well like the “Queen of Mean’ said “only the little people pay taxes”. At least she had the balls to say it!

  10. alliantgroup says:

    In 2012, the health care reform law will require ALL businesses, governments and charities to issue 1099 forms to vendors they pay over $600 for goods and services. This will undoubtedly financially crush thousands of small-and-medium-sized businesses who work for these companies. Read alliantgroups’ (www.alliantgroup.com) Dean Zerbe’s take on the 1099 burden and where its repeal currently stands in Congress and the administration. http://bit.ly/cG7USr

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