Small Business Administration Wants 1099 Requirement Gone

December 17, 2010 | By: TaxCure Staff

SBA and 1099 requirementThe Affordable Care Act was passed earlier this year to provide health care benefits to millions of Americans.

Not everyone supports this Act. However, almost everyone can agree that one condition places an unfair burden on small business owners. The requirement in question is the mandatory filing of 1099 forms for businesses or individuals who have been paid $600 or more for products or services.

This requirement was quickly met with disapproval from small business owners who would be most impacted by the change. Mandatory 1099 filing would not only take up more time and money, it could eventually change the way people do business. In an effort to sidestep this filing requirement it is possible many businesses would opt to work with big-box retailers, which would create a distinct disadvantage for smaller businesses.

The Paperwork Relief Act was introduced in early November by Senator Max Baucus. Supporters of the act are hoping it will repeal the provision in question. The Small Business Administration has announced their support of this repeal in an open letter to small business owners.

SBA administrator Karen Mills stated: “The unintended consequence of a potential paperwork burden resulting from this provision quickly came to light, and we immediately began working with the Administration to reduce the burden of these potential future reporting requirements.”

Mills also stated that repealing this provision will not have a negative impact on the other benefits resulting from the Affordable Care Act, including tax credits for small businesses providing health insurance.

Another supporter of the repeal is the very person who pushed for the Affordable Care Act in the first place. President Obama has stated: “the 1099 provision in the health care bill appears to be too burdensome for small businesses. It just involves too much paperwork, to much filing. It’s probably counterproductive.”

Small business owners have united on many issues in the past and many in the community feel that the repeal of this provision should be without question. The new filing requirements are not going into effect until 2012, however, it is doubtful it will take that long for a resolution to be found. The small business community is hoping it will receive unanimous support from Congress. Many in the community have expressed their dissatisfaction with many of the changes affecting small businesses in recent months. These changes have resulted in increased expenses that many small business owners simply cannot afford.

It is unlikely that small business owners will find relief from the health care reform, however, this action will at least reduce the amount of paperwork they are required to file. It will also allow for the continuation of current business-to-business transactions that make it possible for small companies to stay in business.