U.S. Rep. Steven C. LaTourette (R-Bainbridge Township) today voted to repeal a costly and cumbersome tax requirement in the new health care law that will create a compliance nightmare for small businesses.
The measure, H.R. 4, repeals a new tax requirement that takes effect in 2012 that would require businesses to file a 1099 tax form with the IRS for every vendor they paid more than $600 a year. The requirement was slipped into the health care reform bill.
The 1099 reporting provision has been criticized by many, including the IRS Taxpayer Advocate Service. In a report released in June 2010, the IRS Taxpayer Advocate said the new 1099 reporting requirement would apply to almost 40 million businesses, including more than 1 million charities and tax-exempt organizations and more than 100,000 government entities.
The Taxpayer Advocate report said 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." The report also predicted the IRS would improperly assess penalties "that it must abate later, after great expenditure of taxpayer and IRS time and effort."
The measure passed today by a vote of 314-112, with the congressman's support. It now goes to the Senate for consideration. The Senate earlier this year passed 1099 repeal language as part of a Federal Aviation Administration bill. The House and Senate will have to hammer out repeal language that is identical in both the House and Senate before a measure can be sent to the President for signature.
LaTourette said he's confident the 1099 reporting requirement will be repealed.
"The 1099 reporting requirement has nothing to do with health care, and its days are numbered," LaTourette said. "This would be a compliance nightmare for the IRS, and small businesses should focus on job creation, not filing tax forms reporting the purchase of toilet paper and paper towels from Costco or toner and paper from Staples."
H.R. 4 reduces the deficit by $166 million in the first 10 years, and is expected to reduce federal spending by nearly $20 billion over 10 years.