05.06.10

New Tax laws buried in Health Care bill come to light

Posted in State and Federal Politics, Uncategorized at 2:46 pm by Moorcat

There are two basic principles that I believe alway apply to legislation coming out of Washington today. The first is the “Law of Unintended Consequences” and the second is that any legislation from Wasthington will include changes to create more government jobs and further complicate tax law.

Already, there have been a number of issues with the massive Health Care Reform bill to come to light. Another one hit CNN today Рa small change to the way businesses report taxes that will create mountains of new paperwork for business.

In short, the new HCR bill requires that businesses use the 1099 form to document ANY purchase made by the company in excess of $600. Until this change, the 1099 form was used to document contract work done by individuals outside the company. Now, a company has to document purchases as well. Buy a computer from Cosco? Send them a 1099 form so you can include it in your tax paperwork. Take some business clients to lunch a couple of times, send the resteraunt a 1099 form so you can include it in your tax paperwork.

This constitutes a massive change in how the 1099 form is to be used by business. It also complicates the tax paperwork burden of small businesses that do not have large accounting departments. The Cato institute calls it a “costly, anti business nightmare”.

While the change is aimed at tightening up loopholes in tax reporting in effort to generate more revenue to pay for this massive HCR bill, the impact to businesses – both large and small – has yet to be determined. At the very least, it will require literally millions of new 1099 forms to be sent out and included business tax paperwork, further complicating the tax reporting burden of business.

This law is set to take effect in 2012 and there has already been an amendment proposed to the HCR removing this change. The IRS has yet to issue it’s regulations on this new legal requirement either so it is difficult to¬†determine how this new requirement will be implimented.

The only concrete outcome of this new regulation is that it will require more government employees to go through this mountain of paperwork to make sure businesses are complying with whatever regulations the IRS set to meet the law. Once again, Government shows that is it a jobs program for governmental employees.

Moorcat

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