House and Senate spar on repeal of 1099 reporting rule
Last week, the U.S. House of Representatives passed H.R. 4, a bill repealing the health care reform law provision that requires businesses to furnish 1099 statements to corporate vendors. The Small Business Paperwork Mandate Elimination Act of 2011 passed with a vote of 314-112, with 76 Democrats voting with the Republican block to eliminate the 1099 portion of what has come to be known as ObamaCare.
Previously, the Senate voted for a similar elimination of the 1099 rule, which is set to go into effect in 2012, but there are differences between the chambers regarding what portions of the new 1099 reporting law should be eliminated and what should be kept in place.
The House bill seeks to eliminate all of the changes to 1099 reporting put forth in the health care legislation that became law in 2010. The Senate would like to keep the portion of the new 1099 rules that relates to 1099 requirements on landlords.
Going back to the original legislation, the Patient Protection and Affordable Care Act (aka ObamaCare) requires that all businesses, including tax-exempt organizations and government agencies, must issue 1099 forms to any vendor from whom they purchase at least $600 worth of goods or services during a calendar year. This expands the 1099 requirement to include payments to your utilities companies, office supplies stories, restaurants, hotels, service companies, and so on.
The American Institute of Certified Public Accountants (AICPA) and many other organizations have voiced objections to the reporting requirement, describing the rule as burdensome, costly, and unnecessary.
The House bill has been returned to the Senate where it faces an uncertain fate. The Senate hopes to retain the portion of the 1099 reporting requirement that requires landlords (including individual who own rental property and owners of vacation homes used as rental property) to complete 1099 forms for services provided by any unincorporated service providers (including accountants) but not for the purchase of goods. This landlord provision comes from the Small Business Jobs Act which was signed into law last fall. Businesses will be prohibited from taking a deduction for 1099-related services if the 1099 form is not filed.
The problem that lawmakers in both chambers face is that, due to the self-imposed requirement that no legislation will be passed that in effect lowers taxes without a PAYGO - a budget neutral alternative - there must be a cut in expenses or an increase in revenue somewhere else to pay for the money the government expects it will lose by revoking this provision.
The White House has indicated that it supports repeal of all of the new 1099 provisions.
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