By Kent Hoover, Baltimore Business Journal
Small businesses contend the healthcare legislation will increase business costs and lead some firms to refrain from hiring additional workers in order to avoid requirements that kick in for companies with 50 or more employees.
The chamber also launched a new website, http://www.healthreformimpacts.com, to collect stories from small businesses about how the law is going to affect them.
NFIB already exercised a legal option: It joined a lawsuit filed by 20 states challenging the law’s requirement for individuals to buy health insurance or pay a fine to the government.
Business groups are gaining support on Capitol Hill for one legislative fix: repealing the law’s provision that requires all businesses, whether sole proprietors or giant corporations, to file 1099 forms with the Internal Revenue Service any time they pay more than $600 a year to another business.
That requirement already is in effect for payments made to unincorporated service providers. The health care reform bill expands that requirement in 2012 to all corporations, and covers payments for goods as well as services.
This will heap added paperwork on up to 40 million small businesses, many of them self-employed individuals, who will have to track every payment made to every vendor, and get each vendor’s taxpayer identification number.
“This just adds another burden to your accounting staff,” said Lester Miller, a partner in Miller’s Minuteman Press in Baltimore, which employs about 50. “We’re just going to be pushing out a pile of extra paperwork that I don’t think anyone has the staff to handle.”
The 1099 provision was added to the bill to raise revenue to help pay for health care reform’s cost. The theory is that third-party reporting of these payments will make recipients less likely to try to hide this income from the IRS.
Business groups, however, doubt this provision will bring in anything close to the $17 billion projected by Congress. They also question whether the IRS has enough resources to handle the millions of additional 1099s it will receive every year.
Nina Olson, who heads the IRS’ independent Taxpayer Advocate Service, agrees the burdens imposed on small businesses by the 1099 requirement “may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”
In an effort to reduce this burden, the IRS plans to exempt credit card transactions from the 1099 requirement. These transactions already are going to be reported to the IRS by credit card payment processors, so separate reports from purchasers aren’t necessary, according to the agency.
That exemption doesn’t go far enough, small-business groups contend. Using credit cards instead of cash or vendor credit would raise business costs. Plus, some vendors will insist on cash, because of the interchange fees they have to pay banks on credit card transactions.
““I think I will get a vote,” Johanns said concerning his bill.
Lower-wage firms with fewer than 25 employees are eligible for a tax credit of up to 35 percent of their premium costs.
Read more: Changes sought to health law – Baltimore Business Journal
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