Time to Speak Up – The IRS Wants Your Input

Tucked away in the Health Care Reform Bill enacted in March of 2010 is a provision for yet another round of paperwork for small business.

Beginning in 2012, all businesses (including non profits) will be required to report a wider range of  payments to vendors, subcontractors and others through Forms 1099.  In general, the current rules require 1099’s to be filed with the IRS to report service transactions with unincorporated business which amount to $600 or more in a calendar year.  Electronic filing is required if more than 250 Forms 1099 are required to be filed in any year.  Penalties for failure to file these returns range from $15 to $50 per form, and are applied based on the actual filing date of the late return(s).  Look for these to be increased as a means of enforcement and “revenue enhancement”.

New rules would expand the required reporting to include ALL transactions  to for profit businesses from other businesses, including payments for products as well as services, regardless of whether the business was incorporated or unincorporated.  Most payments made by debit or credit cards would be exempt, however.

Earlier this month, the IRS requested comments that would allow the rules to be applied in a way “to minimize burden and avoid duplicative reporting”.

The IRS’ own Taxpayer Advocate estimates the new requirement will affect 40 million businesses, and criticized the requirement because the compliance burden of the new rules “may turn out to be disproportionate as compared with any resulting improvement in tax compliance”.  Several Senators (all Democrats, by the way) have recognized the additional burden on small business, and have requested that the IRS report its proposed solutions to the Senate Committee on Small Business and Entrepreneurship prior to the effective date of the new law in 2012.

So – stay tuned, and chime in!  Now is the time to be heard, and respectfully express your true feelings, or even request repeal of the law.  Your comments can be submitted via email to comments@irscounsel.treas.gov until September 29, 2010.

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