Senate Rejects Amendments To Repeal 1099 Rules From Health Care Reform Bill

Dec 02, 2010   

On November 29, 2010, the United States Senate rejected two proposals to repeal new 1099 filing requirements for small businesses that were passed as part of the Patient Protection and Affordable Care Act (“PPACA”). This little noticed provision of the PPACA could result in large paperwork and administrative burdens for small businesses. The full text of the PPACA is available at here.

While 1099 tax forms are traditionally associated with the reporting of taxable income for wages of independent contractors, 1099s are already used to report a wide variety of payments of taxable income other than wages such as interest income or dividends. However, the PPACA expands the use of 1099 forms to many more areas than they were typically used before. Starting in January 2012, all businesses will be required to file 1099-MISC tax forms identifying anyone to whom they pay $600 or more for goods or merchandise in a year. Additionally, the PPACA also requires businesses to send copies of the 1099 forms to their vendors, suppliers, and contractors.

The idea behind requiring such a reporting requirement is that businesses would be more likely to pay taxes on income if they knew that income was already being reported to the IRS by other business partners. The new filing requirement is expected to generate $17 billion in additional revenue over the next 10 years that will go to help fund the implementation of the new health care reform package.

Because of the strong opposition from the business community to the new filing requirements, several amendments were put forth on the Senate floor addressing the 1099 requirements. The first proposal, sponsored by Sen. Mike Johanns of Nebraska, called for a full repeal of the 1099 filing requirements in the PPACA. A second amendment, proposed by Florida Senator Bill Nelson, would have modified rather than repealed the provision. Under the Nelson proposal, the threshold for reporting would have been increased from $600 to $5,000 and any business that employed no more than 25 workers at any time during the taxable year would have been exempt from reporting. However, both the Johanns and Nelson amendments were defeated.

If you have any questions regarding the potential impact the PPACA and its 1099 filing requirement may have on your business or any other tax provision, please contact Fuerst Ittleman at contact@fidjlaw.com.