The Senate Passes a Bill to Repeal the Corporation 1099 Reporting Requirement That Had Been Buried in the Health Care Law
President Obama is expected to sign a bill repealing the law requiring all businesses to file 1099 forms with the IRS for payments to any business totaling $600 or more for goods or services, including payments to corporations. The provision had been part of healthcare reform law, known as the Patient Protection and Affordable Care Act 2010. It was scheduled to be effective in 2012.
Both Houses passed the repeal
Last week the Senate approved the repeal by a vote of 87-12 HR 4. The repeal had already been passed by the House. The 1099 requirement was only one paragraph of the 2,000 plus page health care law, but it was estimated compliance would have cost American businesses untold millions. The provision had been criticized by business groups from both sides of the political spectrum.
It seemed the repeal had been assured for several months
In his State of the Union address on January 25th, President Obama addressed his healthcare legislation, saying he was open to making adjustments. Referring to the 1099 requirement for corporations he said, “We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”
The Small Business Paperwork Mandate Elimination Act of 2011, reads in part:
Section 9006 of the Patient Protection and Affordable Care Act, and the amendments made thereby, are hereby repealed; and the Internal Revenue Code of 1986 shall be applied as if such section, and amendments, had never been enacted.
NOTE: This does not eliminate the Form 1099
The Form 1099 is still required to report payments such as these:
- To Independent Contractors who earn more than $600
- To an attorney who is not your employee (even if they are incorporated)
- To an individual / sole proprietor
- To a partnership
- To an estate
The IRS is most likely not happy with the repeal
The IRS had been lobbying for years for 1099 reporting of payments made to corporations. They had been telling Congress adding 1099 reporting for payments to corporations would help to close the Tax Gap which is estimated at $345 billion per year. The provision would have allowed the IRS to more easily track billions of dollars in corporate income.
The Congressional Budget Office had estimated that the provision would have raised $22 billion in additional revenue, helping to close the Tax Gap and help fund the new health care law.
Other tax provisions of the Patient Protection and Affordable Care Act 2010 that may, or may not, yet be addressed (shown in order of projected effective date):
- Year 2013: Increases the Medicare payroll tax and expands it to dividend, interest and other unearned income for singles earning more than $200,000 and joint filers making more than $250,000.
- Year 2014: Provides a tax credit subsidy for families earning up to 400 percent of the poverty level, currently about $88,000 a year, to purchase health insurance.
- Year 2014: Requires most employers to provide coverage or face penalties.
- Year 2014: Requires most people to obtain coverage or face penalties.
- Year 2018: Imposes a 40 percent excise tax on high-end health insurance policies.
The White House press secretary released a statement on Tuesday following the Senate vote that read in part: “…as we move forward, we look forward to improving the tax credit policy in this legislation to ensure we protect small businesses and middle-class families.”
The President is expected to sign HR 4 into law.