There isn’t a business owner out there who doesn’t know about –and probably groans a little when he hears about– the IRS and 1099 tax forms. Unfortunately, that groan may be a little louder now. And, while I don’t relish the idea of being the bearer of bad news, I think it is important for every business owner in America to be aware of a new tax reporting provision courtesy of the new healthcare law.

Buried within the sweeping healthcare law Congress passed is a provision that will expand on the already burdensome 1099 tax reporting requirements. As most small business owners, or at least their accountants, already know currently businesses are only required to report (on a form 1099) any service-related transactions over $600 involving an unincorporated business (sole proprietor, partnership and LLC). Beginning in 2012, the new healthcare law will require owners to send Form 1099s for every business-to-business transaction of $600 or more (cumulatively) for both property and services.

This means that all businesses (no matter how small) will have to file two forms – one with the vendor and one to the IRS – for almost every business-to-business transaction. In addition, since Form 1099 reporting requires the inclusion of a Taxpayer Identification Number for the vendor you do business with, owners will also be forced to spend time tracking down the number for each and every vendor requiring a Form 1099.

If you haven’t glazed over by now, let’s ask the important questions. First, what does this provision have to do with healthcare? Absolutely nothing. It was simply added as a way to pay for this nearly trillion dollar monstrosity of a law.

And, second, what can we do about it? I know I don’t need to tell small business owners how much of a tremendous new paperwork compliance burden this will be for businesses nationwide. But, in case you didn’t know, according to an NFIB Small Business Survey, at $74 per hour, tax paperwork is the most expensive paperwork burden placed on small businesses by the federal government.

Worse yet, this provision will disproportionately harm our small businesses. Since most small firms lack in-house finance departments to track this kind of reporting, complying with the tax code is 66 percent more expensive for small businesses than large ones. This is hardly the kind of burden small businesses – our nation’s job creators – need in tough economic times like these.

It’s unfortunate that such a harmful provision for small businesses was included in the healthcare law without our elected leaders ever holding hearings or conducting analysis on how this new reporting requirement would impact small businesses.

Now that it is the law of the land though, members of Congress are starting to understand that this is a real problem. NFIB is working diligently to encourage elected officials to repeal the 1099 provision, and we are slowly making progress. Legislation has been introduced in both the House and the Senate to repeal the 1099 reporting requirements. We have over 145 co-sponsors signed onto the House legislation, and 19 senators are co-sponsoring the Senate’s bill to repeal this provision. We even had a vote on the House floor, once again showing bipartisan support for repeal.

What we need now is for more small business owners to get involved and put pressure on their members of Congress to support this effort. We encourage anyone who supports small business to call your elected officials, send emails or visit your representatives while they are at home in their districts during August recess. Our best change to repeal this reporting requirement is to band together as one voice and one force for small business.

Working together, we may be able to do something to change this burdensome reporting requirement, but we will only be successful if enough small business owners make their voices heard.

For more information, and to write your member of Congress, visit NFIB’s Issues section on our website, www.NFIB.com/issues

ABOUT THE AUTHOR
Dan Danner is president and CEO of the National Federation of Independent Businesspendent Business.