As if businesses aren't already drowning in regulation, red tape and taxes, here's another little extra you probably haven't heard about yet courtesy of the Obama Healthcare Bill.
You've all heard about the additional 3% tax on homeowners that's buried deep inside the bowels of this bill - yet that will impact less than 5% of homeowners, only under very precise circumstances and only those at the very top of the food chain.
Here's one that will impact a far greater number of you - and not just Realtors® but businesses across the country . Just another little 'thank you' to small businesses from our friend in the White House.
Buried in Section 9006 of the healthcare bill is a provision requiring you to file a 1099 on any business, vendor or supplier that you pay more than $600 dollars a year to. This provision won't become effective until January of 2012 and you can believe NAR, the Chamber of Commerce and a variety of other business groups are fighting to get it out of there - but for now it's there and the administration apparently has every intent to keep it there.
What does it mean? Well, some of you are probably already doing it for some things - like if you have a lawn maintenance person or somebody re-habbing your REO's - you probably already 1099 them unless the bank pays for it or reimburses you.
But now it's down to $600. If you buy $600 worth of supplies from any single company, $600 worth of coffee & donuts for your office meetings, catered lunch for your broker/owner/manager meetings - anything you spend more than $600 dollars a year on with a single vendor for your business, you need to 1099 that business. Spend a week at a business meeting in Sacramento - 1099 the hotel. Take a group of clients out for a nice dinner? 1099 the restaurant. Pay a guy $50 a month to cut your grass at home? 1099 him.
Think it's a pain in the butt for you? Try being the small business on the receiving end who now has a mountain of 1099's to deal with at tax time. It adds another whole layer of cost and accountability to their business, meaning it costs them more to do business, meaning they either take a cut in profit (if they're making any to begin with), or they raise the prices to off-set it. Guess which one it's gonna be.
The theory was the provision would help small businesses obtain more affordable health insurance plans. Not exactly sure of the nexus there but that was the ostensible working theory.
In reality the government is worried about 'the tax gap'. They're concerned businesses (like you) may not be paying all the taxes they're supposed to. IRS Commissioner Doug Shulman cut to the chase when he recently stated "The information we receive is an important window into under-reporting. It can also help us better understand tax compliance and trends in different industry segments". It cuts both ways - businesses that may have been underreporting income will now have a 1099 trail to the IRS. Businesses that have been over-reporting expenses (not any of you) will now have to document where that money was spent. Yeah, that has a lot to do with healthcare.
Well, whether you believe the government's (Administration) reasoning or the government's (IRS) reasoning, you and every other small business owner in this country is gonna be the one getting the shaft again come January 1, 2012. As one administration aide characterized it - 'this provision is a 'voluntary' way of increasing tax revenue without increasing taxes.' Right.
So you can get ready for more paperwork, higher costs and more business failures thanks to Section 9006 of the Patient Protection and Affordable Care Act and the Health Care Reconciliation Act of 2010.
UNLESS you support the groups fighting against this.
Did you really believe them when they told you they could do all that without raising your taxes? Sucker.
Comments(11)