The Health Care Bill Will Affect Business Owners in More Ways than They Know
As if US businesses don’t already have enough paper work to do, it looks as though more will be heading their way.Thanks to the health reform law, US businesses are expected to be flooded with new tax paperwork.
The health care bill mandates that by 2012 all companies will have to issue 1099 tax forms to any individual or corporation from whom they purchase goods or services that exceed more than $600 per tax year.This change will cause businesses to have to issue millions of new tax documents each year.
Traditionally the 1099 form is used to document income for individual workers other than wages and salaries.Under the new rules, if a freelance designer purchases a new Mac Book from the Apple Store, the freelancer is required to send Apple a 1099 form.Additionally, say your office orders printing paper from WB Mason, your business is required to send WB Mason a 1099 form as well.
This bill is changing how the 1099 form is used.Two key changes are the fact that we will now be using these forms to track payments not only for services but also for tangible goods.Secondly, 1099s will be issued to corporations.These two seemingly small changes will result in the need for millions of additional forms.
So many are asking why this tax code revision has been included in the health care reform bill.That’s an easy one!By using the 1099 forms to collect taxes on previously unreported income it will help generate government revenue (the IRS estimates that it loses more than $300 million dollars in tax revenue each year) and help offset the cost of the health care bill.
While small businesses are annoyed that they will have to mail tax forms to big chain stores like Staples, the worst aspect will be the record keeping of tax IDs for every payee and vendor that you do business with.
Until this goes to into effect (January 1, 2012) we won’t know its true effects, until then we can only anticipate how this will effect businesses across the country.