Small Business owners get ready you’ll need to file more form at tax time thanks to Congress. Starting in 2012 40 million people including 26 million sole proprietorship’s must file 1099’s for each vendor the buy $600 or more in goods and service in that year according Nina Olson, National Tax Payer Advocate.
Olson’s office is an independent agency within the IRS says the new 1099 requirement is a major priority for her office. She concerned with law size and scope with taxpayers.
“The 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,” the Taxpayer Advocate Service wrote in a report released this week.
That plan for 1099’s is the capture money that the IRS is not collecting what is owed by business and individuals.
From CNN Money:
The new rules are aimed at reducing the “tax gap” between what individuals and businesses owe and what they actually pay. The federal government misses out on estimated $300 billion each year from tax underpayment. The expanded reporting requirements, which Congress slipped into the landmark health care reform bill passed in March, are an attempt to create a paper trail of 1099s exposing business-to-business payments that might otherwise stay off the radar.
But the cost of that paper trail could swamp the small companies, sole proprietors freelancers forced to generate it. Pennsylvania business networking organization SMC Business Councils surveyed its members and found that they currently average 10 filings a year of 1099 forms. The new rules would push that average to more than 200 filings per year for a typical small business, the industry group estimates.
The IRS will have broad leeway to interpret the rules — and it’s already showing signs that it will look for ways to staunch the paperwork flood.
In a late May speech before the two payroll industry trade group, IRS Commissioner Douglas Shulman announced a major exception to the new rules: The IRS plans to exempt transactions made through credit and debit cards. A separate reporting requirement kicks in next year that will cover card transactions and help the IRS spot unreported payments made through those channels, “so there is no need for businesses to report them as well,” Shulman said. “Whenever a business uses a credit or debit card, there will be no new burden under the new law.”
CNN Money has more.