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Senate fails to dump new 1099 filing requirement

Get ready to handle a lot more paperwork for the IRS. Because the Senate couldnít pass simple legislation this week that would repeal an onerous reporting measure set to sock small businesses, marine dealers can expect to file dozens, if not hundreds, more 1099s beginning in January, 2012.

In essence, businesses will have to track every purchase to see whether total payments add up to $600 or more per year. If so, a 1099 filing will be required. To complicate things even more, youíll also have the extra work of keeping track and segregating payment methods, since the IRS will exempt credit card purchases from the requirement.

The expanded 1099 provision was slipped into the 2,300-page health care reform bill by the IRS as a way to help pay for the cost of that legislation. It is estimated to raise $17 billion over 10 years. But the truth is IRS had been looking for a way to require this reporting for several years but could never find a way to legislate it. When the massive unread health care bill came along it provided IRS the needed cover.

It is a nightmare for the nationís businesses, especially small business owners such as marine dealers who simply donít have personnel, time or funds to handle such a paperwork calamity. Ironically, both Republicans and Democrats, while pleading they didnít know it was buried in the health care bill, say they are all for repeal. Still, they canít get the job done because they canít agree on how to do it.

FYI – Two attempts at repeal were made in the Senate this week by proposing amendments to an unrelated food safety bill. Both failed to get the needed 67 votes. The Republican amendment, which would have required using unspent federal funds to cover the $17 billion, garnered 61 votes. The Democrat amendment, which included no monetary offset, drew only 44 votes.

In spite of the fact that even President Obama and SBA administrator Karen Mills have publicly called for repeal of the 1099 provision, there is no certainty it will come about during this current lame duck session. It likely will fare better going in the new Congress that comes to Washington next January. Certainly thatís expected to be a group of lawmakers more favorable to small business interests.

Even more interesting, though I am not a Constitutional scholar, is the fact that the Constitution requires all tax issues to originate in the House, not the Senate. Accordingly, even if the Senate had passed the repeal, a challenge might come because the House had not acted or initiated action. Hey, thatís Washington for ya!

Bottom line: Itís still in our best interest to keep emailing our Washington representatives, telling them as a small business owners we need the burdens of the new 1099 requirements lifted off our backs.


7 comments on “Senate fails to dump new 1099 filing requirement

  1. John Duffy

    As a very small business it will be very hard to collect the information and prepare 1099 forms.

    Please repeal this..

  2. CD

    We will all have to do business using electronic payments like paypal and credit cards. They want to catch under the table cash business which is still not possible. Government at its best. Oblunder need to be removed in 2012 or “Hello Comrade” will be the new greeting.

  3. zyxw

    You can thank the Republicans for blocking repeal of this provision. The Democrats introduced a clean bill that would have done nothing but repeal the 1099 problem, but Repubs. have vowed to block everything until they get their tax cuts for millionaires back.

  4. AnonymousBob

    Reply to John Duffy:
    A simple Excel spreadsheet or Quicken entry can help you track expenses. Yes, it takes a little bit of time to set up the accounts, but it is something you should have done already as a business owner. But, I do agree that this provision needs to be repealed now.

    Reply to CD:
    Electronic payments are probably the most secure but the fees charged make it less profitable. Your communist greeting is totally useless, though.

  5. Curtis

    If we start a grass roots deal to just not do it, what is the IRS going to do close all of the small businesses down in the country. I do not think so. It is time we stand together and tell the people in office we are not going to stand for this crap anymore.

  6. C. Moore

    AnonymousBob I would love to visit your business to learn more about all the simple things you are doing right & we complainers can’t get a handle on, A learning experience it surely would be. Where do you send the Homedepot 1099 to the local store or HQ in Atlanta, how about the Lowes, Acehardware, digman plumbing, Le Cavior house of truffles , etc…???? Not to mention Brunswick, Yamaha, Attwood, Springfield, etc..

  7. john keim

    I just received your January (2011) issue of Trade Only.
    I was very impressed with Larry Russo’s “insightful” comments on the current state of the industry.
    Hopefully, this will “insite” the joint efforts of the NMMA & MRAA to increase the standards they set for manufacturing and retailing professionals. As a former industry Captain with SR,CC,OMC/RBG, & over 15 years of retailing, I feel uniquely qualified to espouse this subject.
    Having said that, I’m sure that Irwind Jacobs has NO idea what this is all about !
    Go ahead Irwind, load up all those new, naive, dealers with inventory, so the pipeline can be clogged once again & set up for what has occurred these past 2 years. Prepare for another mass “Liquidation”.
    Remember; “only 20% (600) of ALL remaining retail dealers, sell 80% of the boats” !
    Big sigh……………..

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