The American Institute of Certified Public Accountants (AICPA) has asked members of Congress to repeal the section of the new health care law that requires businesses to report to the Internal Revenue Service any purchase from a vendor of goods or services worth $600 or more during the calendar year.
The AICPA said the new requirement to compile the data and prepare the Form 1099-MISC information returns will be burdensome and costly for small businesses. Furthermore, the AICPA said the information collected on the 1099 forms will not be very helpful to the IRS in collecting any unpaid taxes that should have been paid by the vendor because it will be difficult to reconcile payments reported on the forms and income reported by the vendor.
The reporting requirement is included in the Patient Protection and Affordable Care Act and is effective for purchases made in 2012 that will be reported on 1099 forms filed in 2013. The law states that, beginning in 2012, if a business purchases $600 or more in goods or services from another entity (including a corporation), the business is required to provide the vendor entity and the IRS with a Form 1099-MISC information return.
In its letters to the U.S. Senate and the House of Representatives, the AICPA stated, "We believe section 9006 of the Act should be repealed because the provision imposes extremely burdensome information reporting requirements on business taxpayers that cannot be justified in terms of the limited utility such information reports will provide to the government."
The letter went on to say, "The 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."
While acknowledging the IRS's concern to reduce the tax gap and indicating support for that task, the AICPA suggested that, "the extraordinary burden in this instance far outweighs the potential benefits."
National Taxpayer Advocate Nina Olson has echoed this sentiment. In her annual report to Congress, she noted, "The new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance."
IRS Commissioner Doug Shulman has indicated that some concessions are already in place. In a speech in May to payroll industry trade groups, Shulman explained that any transactions paid for with debit or credit cards will be exempt from the reporting requirements because a separate requirement on credit card companies for reporting credit card transactions will give the IRS the information it seeks. "Whenever a business uses a credit or debit card, there will be no new burden under the new law."