Legislature to relieve pending paperwork burden on small businesses fails to get Senate votes

September 16, 2010

The Record and Herald News (NJ)

Carol Lawrence

The U.S. Senate failed to approve either of two bills seeking to overturn or minimize a new federal mandate requiring businesses to send out tax forms for purchases totaling or exceeding $600.

The provision of the Patient Protection and Affordable Care Act ? the health care overhaul law ? requires companies to track and submit to the IRS all business-to-business transactions of more than $600 annually.

Legislators failed to get the 60 required votes to pass either a Republican bill to overturn the provision or a Democratic bill seeking to exempt businesses with fewer than 25 employees and raise the amount of purchases to be reported to a minimum of $5,000.

Purchases using credit cards are excluded. The provision, which won't go into effect until 2012, was added to raise an estimated $17 billion over a decade to help cover the costs of expanding health care coverage.

Currently, businesses must issue 1099 forms to contractors or freelancers whom they pay more than $600. That requirement will now extend to goods for any size company as the mandate now stands. Presently, businesses have to tell the IRS the value of services they buy from vendors.

The U.S. Chamber of Commerce, which twice sent a letter to Senate members with 2,434 signatures asking them to repeal the provision, immediately issued a statement on its website after the voting.

"In this economy, there is little defense for supporting oppressive regulations on small businesses that will hamper their ability to put people back to work," said R. Bruce Josten, the chamber's executive vice president for government affairs.

The business organization said in the letter that the provision "will impose substantial paperwork and reporting burdens on the backs of governments, non-profits, and businesses ? especially small businesses."

At Drape Kings in North Bergen, one of the companies that signed onto the chamber's letter, Vice President Kevin Goodrich said his company would have to issue "thousands" of 1099s if the provision isn't repealed. "That's an accounting nightmare," said Goodrich. "It would require cost, energy, time and effort. And I don't have any of it."

A drape manufacturer and audiovisual equipment supplier for trade shows, special events and theater productions, Goodrich said his staff of around 50 is constantly buying fabric, nuts and bolts, cabling, speakers and computers that exceed $600.

Bob Matthers, director of the tax department for Hunter Group CPA in Fair Lawn, said the provision will be a significant issue because businesses will have to track down tax information first to send the 1099 form to the vendors or businesses they buy from.

"This is going to take a significant amount of time and effort, particularly for small businesses, which will have the biggest problem," said Matthers. "They probably don't have the staff to dedicate the time to get this up and running."

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