As many HVACR contractors know, a barely noticed provision in the health care reform bill threatens to bury America’s small businesses under a mountain of paperwork and filing mandates starting in 2012.
Every business will be required to issue to Forms 1099 to all vendors they pay more than $600 annually. The Form 1099 must also be sent to the Internal Revenue Service.
In addition to issuing the forms, a business will have to get Taxpayer Identification Numbers (TINs) from all of those vendors and withhold payments until it receives the TIN. Penalties apply if that business fails to issue the Forms 1099.
It’s a recipe for disaster. Odds are inadvertent mistakes will be made on those forms, triggering audits and notices of non-compliance from the IRS. ACCA opposed the health care reform bill passed earlier this year, in part because of this onerous provision that burdens small businesses with a paperwork and filing nightmare.
Repealing Section 9006 gained momentum recently when National Taxpayer Advocated Nina Olsen in her annual Report to Congress that the burdens of Section 9006 “may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”
In April, Rep. Daniel Lungren (R-Calif.) introduced H.R. 5141, The Small Business Paperwork Mandate Elimination Act to repeal section 9006. Despite having 145 cosponsors, the bill had not seen action until yesterday when it was included as part of a procedural motion offered by Republicans on an unrelated tax and infrastructure bill. When it was clear the motion would pass, Democratic leaders yanked the underlying bill from consideration, pulling the plug on repealing Section 9006.
So House Democrats are trying to save face by bringing the bill back to the floor today. In their version, the lost revenues would be offset by closing $19 billion in foreign tax loopholes, a cynical move that will draw the opposition of big business interests.
Republicans are objecting because their version was offset by reductions in health care spending.
As a result, small businesses that normally align with large businesses on tax issues were fighting over the Democrat version. Democrats could go home in August and say they voted to help small businesses. And Republicans were forced to choose between voting against repealing the provision and voting for a tax increase.


