A while back when President Obama and congress passed the health care reform law, there was widespread criticism from some small business groups and lobbies because of some stringent new 1099 tax reporting requirements that was a part of the law. Basically that portion of the new law aimed to increase government revenue by having small business and freelancers (like myself) report more transactions to the government via 1099 reporting.
In the past small businesses and freelancers would have to report to the government any time they purchased $600 worth of services from an outside vendor. The new requirement, that was to go into effect in 2012, would also make it a requirement that small businesses and freelancers file a 1099 for every company that they purchase $600 worth of goods from as well. While that may not sound like a huge deal, many recognized that the costs to comply with this order for many small businesses would be a job killer, and in some cases, a business killer. At the very least it would mean a lot of time and money wasted by businesses reporting on what could potentially be hundreds of transactions that could possibly put any vendor over the $600 threshold.
Because it was agreed that this part of the new law wasn't a good thing, Congress and the President worked to come up with a repeal of the 1099 reporting requirement.
1099 Reporting Requirement Repealed
Before the election last fall the talk of how to repeal the 1099 reporting requirement of the health care law started. While it didn't get passed last year before the election, this month the Senate and House were able to come to a solution. They passed a measure that would repeal the 1099 reporting requirement, and relieve small business from at least one more pressure they don't need in this tough environment.
President Barack Obama signed a bill repealing a tax-compliance mandate in last year’s health- care law, giving a victory to business groups that led a campaign against the requirement.
The repealed provision, under which companies would have had to report more transactions to the Internal Revenue Service, was included in the law as a revenue-raising measure. It was to have taken effect in 2012.
“Small business owners are the engine of our economy and because Democrats and Republicans worked together, we can ensure they spend their time and resources creating jobs and growing their business, not filling out more paperwork,” Obama said today in a statement released by the White House.
To cover the cost of the forgone revenue from the repeal, the legislation Obama signed today includes provisions that will curtail health-insurance tax credits in the health-care law.
How Will They Pay For The Decrease In Revenue?
The new 1099 reporting requirement was expected to increase revenue by 21.9 billion dollars, which would help pay for the new health care law.
So where are they going to find that money now that the 1099 reporting portion of the law has been repealed? Though President Obama says he isn't happy about it, they will be minimizing who will be eligible for certain health care tax credits under the new law. (Of course they would never consider cutting back on certain spending provisions in the law!)
The new law changes the portion of the health-care law that deals with the health insurance tax credits that low- and middle-income Americans will get.
Eligibility for the tax credits, which are paid directly to health insurers, is determined each year by examining income from a prior year. At the end of each year, there is a reconciliation through which the government can seek repayment of credits from people whose incomes rose.
The new law changes the calculation and will require more people to return overpayments. Democrats maintained that this portion of the legislation represented a tax increase for people who happened to receive a year-end bonus.
So the government has realized that certain provisions of this law might put an undue strain on small business, and have now repealed those measures. Now if only they would see just how much of a strain the rest of the law will put on our health care system in general – and repeal that as well! (</end rant>).
What do you think of the 1099 reporting requirement repeal? Are you happy about it like I am? Do you think that they should have left it in place? Give us your thoughts in the comments!
I am thrilled by the repeal of the 1099 requirement. That would have been an incredible burden and compliance would have been incredibly confusing I am sure. A few large purchases each year would have greatly increased the amount of paperwork for even a small part-time business. We already fill out tax forms. What more should be required.
That requirement was crazy! I am pumped that it is gone. It shouldn’t really raise money because it was just forcing people to report what they should have been paying anyway