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Camp Amendment Seeks to Help Small Businesses by Striking Health Care Law’s Job-Killing 1099 Reporting Requirement

July 29, 2010

Washington, DC – Today, Ways and Means Ranking Member Dave Camp (R-MI) will offer an amendment to H.R. 5893 that, if passed, will repeal an onerous and job-killing reporting requirement contained in the Democrats’ health overhaul.

Beginning in 2012, small businesses will be required to file a 1099 form to the IRS for every business and individual to which they make total payments of more than $600 for goods and services during the tax year.  This reporting requirement will drive up costs for small businesses because the number of tax forms they will have to file could multiple five-fold  This added expense means employers will have less money to hire new workers and to retain existing ones.

“When small businesses are focused on filling out paperwork and filing more tax forms, they aren’t focused on creating jobs.  We need small businesses to be creating jobs and by striking the 1099 reporting requirement in the health care law we can provide some much needed relief to these job-providers,” said Camp.

The Internal Revenue Service’s own National Taxpayer Advocate highlighted several problems with this requirement in a recent report:

  • “[T]he new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”
  • “[S]mall businesses may have to acquire new software or pay for additional accounting services, incurring additional costs.”
  • “In our view, it is highly likely that the IRS will improperly assess penalties that it must abate later, after great expenditure of taxpayer and IRS time and effort.”
  • “[S]mall businesses that lack the capacity to track customer purchases may lose customers, leaving the economy with more large national vendors and less local competition.”

The National Federation of Independent Business says this provision will have a “direct negative impact on small businesses.”  In a statement they noted the increased costs and burdens resulting from this 1099 provision, which was created without any input or discussion from the small business community:

  • “The reporting requirement substantially increases compliance burdens on honest small businesses. Small businesses lack an in-house finance department to track this kind of reporting and that is why complying with the tax code is already 66 percent more expensive for a small business than a large business. (SBA Advocacy Report: The Impact of Regulatory Costs on Small Firms)”
  • “1099 reporting will cost more in compliance than it will generate in revenue. According to an NFIB Small Business Survey, at $74 an hour, tax paperwork is the most expensive paperwork burden placed on small businesses by the federal government.”
  • “Form 1099 was added to the healthcare bill without Congressional hearings, agency advice or public input. The new requirement was added to the healthcare law in an attempt to raise $17 billion to help cover the nearly $1 trillion cost of the new law, but has nothing to do with healthcare. Congress did not hold any hearings, and agencies did not conduct any analysis to evaluate the impact of enacting this kind of requirement on small business.”

And this week, the American Institute of Certified Public Accountants warned Congress this requirement “may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth …. The AICPA strongly supports efforts to reduce the tax gap, but we believe the extraordinary burden in this instance far outweighs the potential benefit.”

In addition to repealing the new 1099 requirement, the Camp amendment will force those who receive erroneous overpayments of taxpayer-funded health insurance subsidies to pay back a larger share of those overpayments.

The Camp amendment will reduce the deficit by $7.7 billion.