1099 Repeal Bill

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As a part of Obama administration’s health care reform, a provision was passed which required the business owners to file a 1099 IRS tax form to report the transactions above $600 each year starting 2012. According to the Small Business & Entrepreneurship (SBE) Council even individuals getting a rental income of above $600 were required to distribute and file 1099s annually.

In the report by the House Committee on Ways and Means, it is highlighted that the tax paper burden that is imposed with the 1099 provision is disproportionate to any of the improvement in tax compliance and thus, the requirement should be completely repealed. The President and CEO of SBE Council, Karen Kerrigan, stated that a need to repeal the 1099 is necessary for small businesses to flourish. According to her, the 1099 provision puts unnecessary burden on businesses which are trying to expand and invest.

When the 1099 tax provision was announced, a majority of the population argues that it would be a hindrance in the development of individually owned business, as well as the small and medium companies. The adherence to the provision was viewed as being something superfluous and the cost associated with filing of 1099 form was estimated to be too high for the small companies and entrepreneurs to bear. It was estimated that 40% of the emerging small businesses would have had to shut down operations. This would be due to the fact that the cost not only the cost, but additionally it requires the small companies to pay large sums of money to hire professional help for the proper filing of the 1099 tax forms.

Therefore, it was a celebratory day for everyone when the announcement was made that the 1099 repeal bill was passed with bi-partisan voting. 70% of the House members supported the repealing of the 1099 provision. Another fact that made people optimistic about the 1099 repeal bill is that the President himself stated that the 1099 requirement is something that can be compromised upon.

However, it should be mentioned that the Senate’s version of the 1099 repeal bill only addresses the health care law requirement of 1099 and not the rental income requirement. Moreover, the Senate would pay for the repeal by cancelling $44 billion from government’s discretionary spending. The White House, in a statement regarding administration policy, stated that it supports the repeal 1099 bill but it opposes the way HR4 would pay for the repeal.

Furthermore, the opponents of the repeal highlighted the need to determine the source of the revenue to make up for the loss that would be incurred by the government in tax returns. It is estimated by the staff of the Joint Committee on Taxation that the repeal would add more than $21.9 billion to the federal budget deficits over the period of 2011 to 2021. Senators like Carl Levin of Michigan have already started presenting amendments to cover for the potential revenue loss by suggesting introducing additional tax on oil companies.