by Brad Peck

At WebCPA Roger Russell looks at the 1099 reporting mandate in the health care bill, and the American Institute of Certified Public Accountants take on it:

On almost anyone’s benefit-burden scale, the burdens far outweigh the benefits...The AICPA was among the numerous organization responding to the requirements, saying it would be especially burdensome and costly for small businesses to compile the data and prepare the Form 1099-MISC return, and calling for outright repeal of the measure. Moreover, the AICPA said, information provided by the forms will not be particularly helpful in collecting any unpaid taxes because it will be difficult to reconcile payments reported on the forms with the income reported by the vendor.

“This expansion of information reporting may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face,” the AICPA stated. “When businesses start tax compliance planning for 2012, Section 9006 [of the Patient Protection and Affordable Care Act, the health care legislation that introduced the mandate] will impose a significant increase in costs on business with respect to the accumulation of relevant information and the preparation and mailing of Forms1099-MISC.”

In addition, many corporations operate on a fiscal year basis rather than on a calendar year, the Institute noted. “Receipt of Forms 1099-MISC by these fiscal year corporations would not provide useful information as the corporations would be receiving calendar year information, triggering a burdensome income reconciliation procedure for the taxpayer that would be necessary to interpret the data,” said the AICPA.

...This week, the U. S. Chamber of Commerce sent its own letter to Congress calling for repeal. The letter included 1,100 signatures from local chambers of commerce, associations, and businesses of all sizes. The letter pointed out that the requirement would increase accounting costs, and expose businesses to costly and unjustified audits. Moreover, it said the mandate could alter marketplace behavior to the detriment of small businesses and startups. Customers might consolidate their purchases by using several large vendors with broad geographic presence and more diverse product lines instead of a number of small vendors.

You can read and sign on to our 1099 repeal letter here to help spare small businesses this costly and ineffective expense.