A provision contained in the Patient Protection and Affordable Care Act (PPACA) will significantly increase the amount of paperwork businesses will have to file with the Internal Revenue Service (IRS).
Beginning in 2012, businesses will have to file a Form 1099 to all vendors, both incorporated and unincorporated, to which they pay more than $600 annually for both goods and services. This is a shift from current law that requires a Form 1099 to be filed for only services from an unincorporated vendor for which the cost totals $600 or more.
The Taxpayer Advocate Service (TAS), an office within the IRS that is tasked with identifying unfair policies, estimated in its mid-year report to Congress that 40 million businesses and other entities will be subject to this new requirement, including 26 million non-farm sole proprietorships, four million S corporations, two million C corporations and three million partnerships.
As part of the Coalition for Fairness in Tax Compliance, ABC signed onto a letter sent to Congress last September, that pointed out that all businesses, no matter how small, will have at least five vendors, and with millions of businesses filing one form to each vendor and one form to the IRS for each vendor, the number of 1099s filed each year could exceed 100 million.
May 13, ABC signed onto another letter supporting the Small Business Paperwork Mandate Elimination Act (H.R. 5141) which would repeal the provisions in the PPACA that require the increased reporting.
“The new reporting has nothing to do with health care, but is deemed as a way to raise revenue by closing the tax gap,” the letter stated. “Yet, little data exists to demonstrate that the newly collected information is a source of the tax gap and it is unclear whether and how the IRS can use the paperwork. Even worse, under this proposal, the burden of finding noncompliant taxpayers is placed on the compliant taxpayers required to file these new forms.”
The IRS is expected to release a final rule implementing these provisions in 2012, but they are accepting comments until Sept. 29. To submit comments visit the
IRS website.