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US House Holds Hearing On IRS Reporting Rule

by Mike Godfrey, Tax-News.com, Washington

11 February 2011


The United States House of Representatives Small Business Committee held its first hearing on the repeal of the requirement for businesses to file 1099 forms that would report payments made for goods and certain services to the Internal Revenue Service (IRS).

While the United States Senate, on February 2, voted not to repeal President Obama’s health care legislation, it did pass an additional motion to stop the reporting requirement, to be introduced in January 2012 and aimed at giving the IRS more tools to ensure all owed taxes are paid. It 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 President Bush’s administration to help keep better track of what businesses spend and earn, which in turn would help to keep track of tax liabilities. However, following passage of the law as part of the health care reform legislation last year, some business owners, especially of small businesses, expressed concerns that, when the provision went into effect, the forms would place too large a paperwork burden on businesses struggling in a still-recovering economy.

The House Small Business Committee Chairman, Sam Graves, said: “This new 1099 requirement will cause an avalanche of additional 1099 forms to be filed, and affect over 36m entities. At a time when we should be making it easier to create jobs, promote growth and invest in our economy, small firms don’t need yet another costly and burdensome mandate.”

Daniel Lungren, the Republican sponsor in the House of the Small Business Paperwork Mandate Elimination Act, which would repeal the requirement, added that it conveys “the worst possible message to the small business community. It reflects a disconnect with the day to day reality faced by the men and women involved with companies in each and every one of our districts.”

The US Chamber of Commerce (USCC) also submitted testimony to the Committee for the hearing, calling on Congress to repeal the 1099 reporting requirement. To ensure that the committee hears from small businesses in their own words on what the 1099 reporting mandate would mean for them, the testimony included quotes from small business owners and local chamber executives.

The USCC’s testimony was part of a larger effort to bring attention to the burdensome impacts of the requirement on US businesses. It has organized a coalition of approximately 2,700 organizations, chambers and businesses from across all 50 states and employing millions of US workers. Each has signed its letter calling on Congress to repeal the 1099 reporting mandate without raising taxes on any segment of the business community.

As stated in the USCC’s testimony, “when the United States is depending on the small business community to generate jobs and grow the economy, lawmakers are diverting their precious time and resources to collecting volumes of information and filling out mounds of new paperwork for the government. The USCC is asking that Congress quickly and fully repeal this onerous provision.”

TAGS: compliance | tax | small business | business | tax compliance | law | Internal Revenue Service (IRS) | legislation | United States | regulation

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