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Another hidden cost of new Healthcare Bill

Another hidden cost of new Healthcare Bill

Another hidden cost of new Healthcare Bill

(OP)
The new Healthcare Bill in the U.S. was a massive document that not enough people read thoroughly.  One new burden on business is that anyone you pay more than $600 in a year must get a 1099.  If you buy a computer at Best Buy you have to send them a 1099.  It used to be that you had to do a 1099 for services, but now according to Section 9006 you have to issue a 1099 for tangible goods--anyone know Wal Mart's Taxpayer ID number?

Read about it at http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/?hpt=C2  

David

RE: Another hidden cost of new Healthcare Bill

Why do I have a hard time believing this??  Are you sure this is right??

RE: Another hidden cost of new Healthcare Bill

(OP)
Look up the bill, it is section 9006.

RE: Another hidden cost of new Healthcare Bill

Imagine the cost for Walmart etc on this, I think they will be screaming to their congressmen.

Peter Stockhausen
Senior Design Analyst (Checker)
Infotech Aerospace Services
www.infotechpr.net

RE: Another hidden cost of new Healthcare Bill

(OP)
Walmart has a legion of accountants, accounting clerks, and computers.  They'll just change a limit in a program and pay an extra $100k/year in postage (and I guess send a 1099 to the post office).  I'm not going to cry for Walmart.

I'm more concerned about me.  I looked at my accounting methods (I don't want to call it a "system") and if I had to do file the 1099 for people I buy stuff from for 2009 it would take about 250 hours of manual work, not counting the effort required to find out the tax id numbers for the people I buy stuff from.  At my charge rate that is a lot of money.  I don't have an accountant because he wouldn't accomodate my rate sheet (i.e., different rates for retainers, T&M jobs, and teaching, different information capture requirements for each) so I started doing it myself.  It has been pretty easy for 7 years.  

This new BS may be enough that I won't be able to stay in business much after 2011.  I'll be 59-1/2 early in 2013 and can start taking money out of my 401K.  Maybe I'll work through tax time 2013 and just not do the 1099 stuff and figure by the time they catch me I'll be retired on an island somewhere.  I was planning on shutting down before all the provisions of the Healthcare plan went into effect in 2014 anyway so it is only 10 months early.

David

RE: Another hidden cost of new Healthcare Bill

I didn't believe it at first too but it is true. I think I'm getting a case of paranoia here but this is more than about the paperwork involve and putting the burden to all the businesses.

Think about it, it's a way for the government to keep tabs, being big brother. If I buy a used truck from a person or buy all kind of junk from ebay for my business, with that bill, they all get reported now to the IRS if more than $600. Whether the transaction is taxable or not for the seller, that is for the IRS to determine. They can scrutinize these kinds of transactions now because of the paper trail.

It's also like a tax increase because now the government will have their hand on every transaction, looking for potential tax revenue. Also hire more federal workers to do this so a more bloated government.     

RE: Another hidden cost of new Healthcare Bill

You guys and your "land of the free" are a constant source of merriment.

- Steve

RE: Another hidden cost of new Healthcare Bill

My question is where does it stop?  Do I have to issue a 1099 to my internet phone service provider?  What about my wireless telephone?  Restaurants where I may spend more than $600/yr entertaining clients? All of these services are provided by corporations and was not req'd in the past, but does this become fair game now as well?  I typically do 3-5 1099 forms per year.  It could get near 100 and I am just a single man operation.

Travis Mack
MFP Design, LLC
www.mfpdesign.com
 

RE: Another hidden cost of new Healthcare Bill

(OP)
It stops at $600.  If you take clients to the restaurant 6 times at $100/visit then you have to sent the restaurant a 1099.  My cell phone costs over $600/year (hell, I had a $600 month last year) so yep.  My phone bill includes Internet and Long Distance so for my, yep.  I did more than $600 with three office supply places I would have to sent 1099's to.  The US Post Office got more than $600 of my money.

I'm thinking that when the rules are finally published (in 2012 after they are already in effect, the government has stopped caring about the Ex Post Facto clause of the Constitution), they will exclude things you charge on a credit card, but I could easily be wrong about that.  The stated intent of this nonsense is to catch the people who do cash/check business and don't report all the money coming in.  If you accept credit cards then you are already getting the equivalent of a 1099 from your bank for that part of your income and you are already writing off the 3-5% that the credit card company charges you.  At least that is what I'm hoping.

David

RE: Another hidden cost of new Healthcare Bill

I am wondering if you can beat them at their own game, and send 1099 forms for everything, by paper not electronically and overwhelm the system.
Or would this be like wrestling with a pig in the mud?
B.E.

RE: Another hidden cost of new Healthcare Bill

(OP)
My read is that it is the pig in mud scenario.  If the IRS gets behind, they hire more people and after the rush, they keep them on.  Empires get larger.

David

RE: Another hidden cost of new Healthcare Bill

Rats
That's not what I wanted to hear.
B.E.

RE: Another hidden cost of new Healthcare Bill

Yes, quite irksome, but worry not.  

This country has a built-in mechanism for radical non-violent revolutionary change of government called the electoral process.  It was set up that way so that so that opportunities for incremental change would occur every two years.  

That low, ominous rumbling noise you hear in the background is not the machinery of war or advancing troops.  It is the approaching tsunami of angry discontent that promises to sweep the political coastlines.  The pendulum will swing back the other way before too long.

TygerDawg
Blue Technik LLC
Virtuoso Robotics Engineering
www.bluetechnik.com

RE: Another hidden cost of new Healthcare Bill


Now, now SomptingGuy... have some sympathy. I've just looked up on Wiki what "1099" form is - I'm still not sure, but there appears to be 23 variants of it!

Is it to do with tax payable or claimable?

At least here in the UK, we only have one VAT (Value Added Tax) form, and all accounting packages do it automatically.

H

www.tynevalleyplastics.co.uk

RE: Another hidden cost of new Healthcare Bill

How can anyone know what obscure forms they were supposed to have filled in until they miss one?  I was perusing the IRS site some years ago and discovered which forms I should have filled in before leaving the US.  A bit late!

- Steve

RE: Another hidden cost of new Healthcare Bill

(OP)
The 1099 form is basically "Other".  If you work for someone as an employee, they have to give you (and the IRS) a form W-2.  If you hire a consultant it is inappropriate to give them a W-2 and you have to tell them (and the IRS)how much you paid them.  In comes the 1099.  It is very basic form that used to be pretty easy to fill out (as long as you have the necessary ID numbers).  Then the state governments were required to tell the IRS if you got a tax refund--this requirement has a little bit different information so they came up with a 1099-GOV.  etc.  Ad Nauseum.  Now there's 23 variants of the form.  I figure for the new requirements they'll make a new variant, and that a very small percentage of the forms they receive will be on the right version.

The VAT is looking better and better, except none of the merchants I dealt with in the London area had a clue about it.  When I did my expense statement after my recent extended trip to the UK, I had around 80 receipts and only 12 of them had VAT listed.  5 had two different VAT rates and the clerks couldn't tell me which one I had paid.  I'm not sure how clean your "nice clean" VAT program really is.

David

RE: Another hidden cost of new Healthcare Bill

David,

Just out of interest, what can you do with UK VAT receipts?  Can you reclaim as a non EU citizen?  Whenever we travel overseas on business, we are instructed to bring back all reciepts, although sales taxes paid outside of EU are just lost.

- Steve

RE: Another hidden cost of new Healthcare Bill

(OP)
The company that is doing the administrative work for the course I'm teaching wants VAT broken out separately.  It is a Canadian company and I'm not sure if they get a rebate from UK or if the Canadian tax system treats VAT differently.  When I teach classes in Canada they want GST split out, so I was just assuming it was the same thing.

VAT on the crap you buy in tourist places was pretty much just part of the price and if there was any rebate it was beyond me.

David

RE: Another hidden cost of new Healthcare Bill

(OP)
Sure glad that the VAT scheme is so "simple" compared to our "complex" system.  That link reads like it was written by the same goobers who are employed by the IRS.  And the rules are just a convoluted.

David

RE: Another hidden cost of new Healthcare Bill

It will be another law that nobody follows.  There are tons of these that have been in place for years that nobody follows such as... giving your babysitter a 1099, driving below the speed limit, reporting your tips if your a waiter, and leaving the country if your an illegal alien.  There's even a tax form to report your income from the sale of illegal drugs.  

Speaking of crazy laws, did you hear about the EPA rule that became effective April 22, 2010.  If you hire anyone to work on a house older then 1978 and they disturb greater than 5 sf of any painted surface, they must perform lead abatement measures.  The house must be sealed off, all workers wear ventilations systems and protective gear, clean every surface, all debris must be treated as hazardous materials.

RE: Another hidden cost of new Healthcare Bill

You know you are not obliged to give a 1099, you only do that if you want to claim the money off your taxes.
  You can either pay the tax yourself and say nothing, or you send the form to claim the expenditure.Of course we would like to reduce our taxes so,
 in this manner the IRS turns us all into a bunch of finking Freddie's. Grand aint it.
B.E.

RE: Another hidden cost of new Healthcare Bill

Quote:

The VAT is looking better and better, except none of the merchants I dealt with in the London area had a clue about it.  When I did my expense statement after my recent extended trip to the UK, I had around 80 receipts and only 12 of them had VAT listed.  5 had two different VAT rates and the clerks couldn't tell me which one I had paid.  I'm not sure how clean your "nice clean" VAT program really is.

Thats the beauty of the VAT system, government can raise the VAT any time they want and nobody really knows how much tax they are paying. Ideal system for a liberal tax and spend government where government can balance the budget by raising the VAT whenever necessary. Too bad they never lower it...
 

RE: Another hidden cost of new Healthcare Bill

One way governments get their camels nose under the tent with VAT, is to offer to cut income tax.
 Once the VAT is established, guess what happens to the income tax?
B.E.

RE: Another hidden cost of new Healthcare Bill

Somehow I think this changes before it becomes effective in 2012.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East - http://www.campbellcivil.com

RE: Another hidden cost of new Healthcare Bill

I am with MiketheEngineer.
the right wing, anti-everything has a way of cheery picking everything they don't like, they exagerate things out of context and exagerate it to make it look were going to get tissue out of Linens tomb and recreate him to run the country.
 

RE: Another hidden cost of new Healthcare Bill

(OP)
"right-wing, anti-everything".  "Linens tomb".  "cheery picking".

BJC, your comments would carry more weight if you bothered to spell check, proof read, and avoid ad hominem attacks.

This thread is about Section 9006 of H.R 3962.  It is not cherry picking, it is a discussion of the law of the land.  The discussion is about the impact on our businesses of this seemingly unrelated add-on to the bill.

You and MiketheEngineer (whoever that is) are certainly welcome to discuss how this part of the bill will affect your business, but please try to keep the personal attacks confined to the other sites you play in.

David

RE: Another hidden cost of new Healthcare Bill

here's the complete text of section 9006 - not sure how this affects 1099's

Full bill is available at: http://americanaffairs.suite101.com/article.cfm/2010-health-care-reform-bill-text--read-hr-3590--hr-4872

Quote:

SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
(a) IN GENERAL.—Section 6041 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new subsections:
'(h) APPLICATION TO CORPORATIONS.—Notwithstanding any
regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term 'person' includes any corporation that is not an organization exempt from tax under section 501(a).
'(i) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.'.
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.—
Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended—
(1) by inserting 'amounts in consideration for property,'
after 'wages,',
(2) by inserting 'gross proceeds,' after 'emoluments, or
other', and
(3) by inserting 'gross proceeds,' after 'setting forth the amount of such'.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to payments made after December 31, 2011.

RE: Another hidden cost of new Healthcare Bill

(OP)
Link to the IRS Code Section 6041 (here's a link to it http://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._6041._Information_at_source) and make the required changes and you'll see that Section 9006 extends existing 1099 requirements to payments for material goods (i.e., property).  The existing law requires "(d) Statements to be furnished...", i.e., a Form 1099, and the new law extends this requirement to tangible goods.

David

RE: Another hidden cost of new Healthcare Bill

I admit, I was too lazy to look up the 1986 IRC section that was referenced and make the substitutions. That requires a lot more effort and is likely one reason why this little "adjustment" to the IRS reporting requirements got worked into the bill without anybody noticing.  

RE: Another hidden cost of new Healthcare Bill

(OP)
You're not the only one.  It took me almost an hour to understand that little section.  I ended up copying the IRS code into a Word document and actually made the changes in a different color to see what the heck they were saying.

I've been very involved with contracts, regulations, and other legal stuff for my whole career and it took me an hour.  Most small-business owners have expertise in other areas and don't want to master legal-speak.  This "little" change to the tax code (which was stuck in 5 bills this year to try to sneak it through, the author is trying to find unreported income) will change some details about the way every small business works (e.g., I'm going to keep track of where I spend office supply money and as I approach $600, I'll change suppliers, same with vehicle fuel).

By the way, the IRS Code does not require a 1099 for anything.  It specifies the list of data that must be provided to the IRS and to the person you paid.  A 1099 has blanks for all of the required data, but folks like Fidelity Investments provide the information free form instead of on the form.  That is why if you search on "Form 1099" within the Health Care bill or in the referenced section of the tax code you get zero hits.  This feels sleazy to me and we should all thank the "right-wing anti-everything" pundit that dug it out.

David

RE: Another hidden cost of new Healthcare Bill

I work for a large international company and I would guess we are talking about hundreds of 1099's just for office supplies alone. It will take a team of bean counters to keep track of all of this and I'm sure that will take a sizeable chunk out of our profit and any potential profit sharing, stock dividends or other compensation. However it will likely not result in any additional tax money collected by the IRS.  

RE: Another hidden cost of new Healthcare Bill

(OP)
I used to work for one of those, and across the U.S. the number is tens of thousands (hundreds for office supplies is conservative).  I did an analysis in the early 80's to see how many vendors we were going to have to train to give us the "right" information on invoices so our new  (mainframe) invoice processing system would work right.  I remember breaking the data into total billing categories and the under $1,000 list was REALLY long (hundreds of pages as I recall).  I bet that very few of them failed to claim the amount we paid them.

It is funny, one of my clients is a huge multi-national and they have only sent me a 1099 with the right amount once out of 7 years I've been in business.  It seems to be hard to get the info right for services, I think it will be impossible to get it right for goods.

David

RE: Another hidden cost of new Healthcare Bill

here's the latest
CNN Money

 

RE: Another hidden cost of new Healthcare Bill

(OP)
Well, based on that I'd say that the pundit that thought that credit card purchases would be exempt was wrong.  It was interesting that they estimated 1/2 hour per 1099 and raising the number from 10 to 200 would increase the burden from 5 hours to 100 hours--and the 200 Form 1099 number did not include purchases from corporations or for stuff (as opposed to services), I bet the number of 1099's will average closer to 400 per business or about 1/12 of your annual gross.

David

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