US Firms Still Face Reporting Blizzard

by Mike Godfrey, Tax-News.com, Washington

02 December 2010

The United States Senate Finance Committee Chairman, Max Baucus, has failed in his attempt to repeal the legislation that requires businesses to file forms that would report payments made for goods and certain services to the Internal Revenue Service (IRS), but has vowed to keep on trying.

The reporting requirements, to be introduced in January 2012 and aimed at giving the IRS more tools to ensure all owed taxes are paid, would use Form 1099 for businesses to indicate all payments made to other companies of above USD600 in any one year. This was an idea proposed by the President Bush administration to help keep better track of what businesses spend and earn, which in turn would help to keep better track of tax liabilities.

However, following passage of the law as part of the health care reform legislation earlier this year, some business owners, especially of small businesses, expressed concerns that, when the provision does go into effect, the forms would place too large a paperwork burden on businesses struggling in a still-recovering economy. In response to those concerns, Baucus indicated that he would look to a repeal of the new reporting requirements, while looking for other ways to improve tax compliance.

Baucus found it impossible, however, to achieve the necessary majority in the Senate to have the legislation repealed, in large part because the notional loss to US tax revenues which would result from the repeal was uncovered in his proposal.

He has, however, vowed to continue fighting for the repeal of the requirements. He said that “small business owners voiced legitimate concerns that these requirements would be burdensome, and the Senate should act in response to those concerns. I am disappointed that we weren’t able to repeal these requirements today, but I intend to keep working until we do. Our bill will allow small business owners to direct their focus onto job creation and growth rather than on paperwork.”

He may, in fact, join forces with the Republican Senator, Mike Johanns, who has also proposed a bill to repeal the Form 1099 requirements, but also failed in his attempt, even though his proposal used unspent and unobligated accounts to replace the loss of revenue.

Johanns also expressed his disappointment in the failure of the Senate to repeal the paperwork requirement. “Despite a chorus of discontent about this burdensome provision and overwhelming support from both sides of the aisle to repeal it, the Senate again failed to support our nation’s job creators,” he insisted. “More than 40m businesses across the country are now in jeopardy of being hit by this paperwork monsoon.”

The US Chamber of Commerce (USCC) added its voice to the chorus of disappointment, pointing out that “it is unfortunate that the Senate again today failed to pass a measure that would have prevented an unprecedented burden on small business reporting and paperwork requirements at a time when they can least afford it.”

“Raising taxes on small business owners or requiring them to spend precious time and resources reporting to the federal government rather than producing, growing, and creating jobs for Americans makes absolutely no sense,” the USCC concluded. “In this economy, there is no justification for supporting unnecessary regulations on small businesses that will hamper their ability to get Americans working again. We are hopeful that this provision will be a top priority for the next Congress.”

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