Many small businesses were opposed to the Patient Protection and Affordable Care Act (aka “Obamacare”), because they weren’t convinced that it would protect patients or make health care more affordable. The consensus view was that it was a teeming stew of mandates whose eventual costs would far outweigh the small, temporary tax credits it contained for small businesses that provided health insurance for their employees.
One particular mandate in the legislation is now surfacing and is generating great ire among small business owners as it comes to their attention. It centers upon new IRS Form 1099 reporting requirements for all businesses. In essence, it will require—beginning in 2012—all businesses to issue a 1099 on virtually every non-credit card purchase totaling $600 or more with any vendor they do business with during the year. This is going to be a paperwork and bookkeeping nightmare!
Here is how the new mandate would work. If a business, for example, spends $600 or more with a particular gas station, office supply store, or restaurant during the course of a year, that business will have to issue a 1099 form to those vendors. This will further require the business doing the purchasing to collect certain information from the vendor, such as the legal name, address, and taxpayer identification number of each vendor. Small businesses will enter 2012 facing a complex new era of record-keeping, data collection, and reporting requirements. The new system is going to significantly increase costs to businesses—especially small business—throughout America. Small businesses all of a sudden are going to find themselves subject to costly and unnecessary IRS audits, fines and penalties. Their response to these new burdens is going to be passionate—and it should be.
What is equally going to anger small businesses is the reason why the 1099 mandate was created. The Democratic leadership in Congress had huge problems trying to make the numbers work for the health care bill. The party line was that it was going to reduce health care costs and also decrease the deficit. Some government apparatchik came up with the number of $17 billion that could be raised from increased tax payments if the 1099 requirement were put in place. Of course, none of them cared what cost impact it would have on small businesses, or how many workers might lose their jobs because of it. It was simply a means to an end, and the end was the passage of the health care bill. The overriding issues in the country right now are jobs and economic recovery. Placing huge new regulatory and paperwork burdens on businesses is going to have a significant negative effect on job creation and economic growth.
The longer the Patient Protection and Affordable Health Care Act is scrutinized, the more problems that it will create are uncovered. A majority of voters want the act repealed. As long as President Obama is in office, his veto will ensure that is not going to happen. The legislation is being challenged in court, but there is no certainty that it will be ruled unconstitutional. There will, however, be many attempts to reduce the negative impacts of the legislation that are now manifesting themselves. Members should immediately file bills in the lame duck session after the elections to remove the 1099 requirement. If it isn’t repealed this year, the first bills filed in the next Congress should target it. It is a dumb, job-killing overreach and it should be eliminated expeditiously.