A New Assault On Small Business That May Affect You

I read an interesting article in BusinessWeek magazine entitled "Health-Care Bill Surprise: 1099 Nightmare" the first week of June and I think it is newsworthy enough that I decided to share it with you. It is yet another little gem buried deep in the new healthcare bill. Like the '3.8% "Sales Tax" on Your Home?' this provision is intended to help pay for the new healthcare bill.

The provision will require companies to report to the IRS payments of more than $600 a year to ANY vendor. That means that if your company pays more than $600 to a cell phone provider, a gas station, FedEx, the Post Office, etc... you will have to obtain their tax ID number so you can send each respective company a 1099 for those services. The motivation behind this is to capture the estimated $2 billion or more a year in taxes on income that currently goes unreported by contractors and small businesses.

The paperwork nightmare coming to small businesses is going to be huge because now the staff is going to have to track the company expenses in a brand new way; by how much is spent with each vendor. What if a small business doesn't have a staff or enough staff to keep up with this? This provision will impose extra costs on business owners who, in turn, have to pass this extra cost on to the consumer via higher prices, which is not likely in the current economic environment, or the business will simply have to absorb the cost and make less profit.

If you don't own a small business you may glance at this and decide it doesn't affect or concern you and skip reading it. However, it could very well affect you going forward and here's how. If you pay for child care, under current law, you have to provide the IRS with the child care provider's Social Security number or tax ID. Why? So that the IRS can make sure that the child care provider is reporting their income. How about the fact that you have to provide the IRS with the Social Security number for each child you plan to claim as a dependent on your taxes? You have to prove to the IRS that you have children so you can claim them as dependents. It's just another example of the government putting an extra burden on those who do things right to catch those who do things wrong.

So where am I going with this? Is it possible that the IRS will take this 1099 provision and bring it down to the consumer level? They have with child care. What will you do if the IRS starts requiring you to track every business that you spend $600 or more with? Do you have a housekeeper? Do you pay him or her more that $600 per year? Do you have a yard maintenance service? Do you pay him or her more than $600 per year? Do you spend more than $600 per year on your cell phone? Gas? Auto maintenance? The list goes on.

Do you know how to fill out a 1099? Do you know where to get a 1099? Do you track your expenses close enough to know who you need to send a 1099 to? This bill essentially forces every single businessperson to become a watchdog for the IRS. Is it so hard to believe that the next step could be to make you and I watchdogs as well? Remember what Nancy Pelosi said? "You are just going to have to pass the bill so you can find out what's in it!" Are you liking it so far? I would love to hear your thoughts. Feel free to comment below.