Posted by: realtormarkpalace | February 11, 2011

New 1099 reporting will burden businesses

WASHINGTON – Feb. 11, 2011 – Under the Patient Protection and Affordable Care Act approved last year, businesses will have to file an IRS Form 1099 for each vendor from whom they spend more than $600 in goods or services in any given tax year starting in 2012.

In testimony before the House Small Business Committee on Wednesday, Mike Kegley, president of the Home Builders Association of Kentucky, told lawmakers that the collection of W-9 forms, monitoring payments over the course of a year, and additional staff time will cost individual small businesses thousands of dollars per year.

Kegley, who built six homes last year and employs seven workers, estimates his firm would have had to file an additional 173 forms for 2010 had the law been in effect. “It would have cost my company $6,400 to obtain and catalog the W-9 forms and $2,600 to generate the additional Form 1099s, for an estimated total of $9,000,” he said. “Rather than hiring additional workers to expand and grow, small businesses will be spending money on accountants and bookkeepers in order to keep up with these new requirements.”

The National Association of Home Builders has taken an active stance against the new 1099 reporting requirements, claiming it will make it even more difficult for small businesses to compete with larger, corporate businesses.

“Businesses large and small that sell goods will receive thousands, if not tens of thousands, of additional forms that they will have to match against their records, Kegley said. “Businesses will be overwhelmed.”

NAHB also says that smaller firms will try to reduce their paperwork burden by purchasing from fewer sources.

Independent landlords

While all small businesses will be hit by the broader 1099 reporting requirements next year, the Small Business Jobs Act of 2010 stipulates that independent landlords – effective as of Jan. 1, 2011 – must submit 1099s for transactions totaling more than $600 in a year.

“By imposing this change in the law with less than three months notice, we believe it is reasonable to say that landlords have been set up for failure when it comes to compliance,” said Kegley. “NAHB urges Congress to reexamine the wisdom of imposing these burdensome requirements on independent landlords and, ultimately, to repeal them.”

Meanwhile, the Senate on Feb. 2 adopted an amendment to the Federal Aviation Administration reauthorization bill to repeal the new 1099 reporting requirements in last year’s health care law.

© 2011 Florida Realtors®

 

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