10 ms·

Costly IRS 1099 Mandate Slipped into Health Bill

140 points by there 17y ago

rbranson 17y ago
http://www.theapchannel.com/accounts-payable/node/522 http://www.theapchannel.com/accounts-payable/node/522 From above: Although these changes were passed in the new health bill, they are not new ideas. The White House and Congress have been trying to require corporate reporting for years. The measure was included in budget proposals issued by Presidents Bush and Obama. "This has bipartisan support," says Doug Rogers, director of consulting services at IRSConsulting. "It was never a matter of if, but when."
jrockway 17y ago
Will I really have to submit a 1099 to the IRS for my phone bills, electric bills, rent, etc.? I have a feeling someone misread this.
- hga 17y ago
  If you are a business, and those payments total more than $600 in a year, yes. According to Cato, many "someones" have read it the same way.
  - gte910h 17y ago
    On the plus side, non-compliance is going to be so high at first, I doubt many will be "enforced" about it.
    - bradgessler 17y ago
      You should consider that while some laws are not enforced, it's yet another lever that the government can use against you. In this case, it would probably give the IRS even more broad reaching powers to audit people and businesses for not being compliant.
      - deleted 17y ago
        [deleted]
  - jrockway 17y ago
    But what counts as a business. If I write a book and get $5000 in royalties on a 1099, do I have to send Amazon a 1099 for the computer I bought to write the book? Even if I do... not gonna happen.
    - hga 17y ago
      Unless you establish a "business", however that's defined by the Congress and IRS (Schedule C at a minimum? It's been too long since I filed one.), and it pays for the computer, no.
- ratsbane 17y ago
  That was my thought too. If I buy a car, do I have to send the dealership a 1099? Worse yet, if I spend $601 on gas at the same gas station in $30 chunks, do I have to keep track of the receipts at the end of the year and send them a 1099? What if it's at three different gas stations all owned by the same company. How do I know? Ask for their EIN every time I pay? This would be a complete disaster. Surely this isn't what the bill actually requires?
  - hga 17y ago
    Only if it's a company car. And, yeah, this would get into quite a mess. If your company was large enough and paying for the gas, they'd pretty much have make you use a card that would allow them to consolidate the payments with all the other company cars to know if they have to send 1099s.
  - deleted 17y ago
    [deleted]
patrickgzill 17y ago
Was it a slipup? Or will it just force more people to form corporations?
- hga 17y ago
  Won't make a difference, I gather. E.g. previously if you were a business and paid rent to a landlord who was a individual (e.g. he reported that income on his individual income tax forms) you'd have to file a 1099. Now, in all cases, you'll have to file the 1099 (well, unless the rent is less than $600 per year).
  - patrickgzill 17y ago
    What I mean is that in most cases, corporations do not have to receive a 1099-MISC from you, no matter how much you pay them. see http://www.irs.gov/instructions/i1099msc/ar02.html http://www.irs.gov/instructions/i1099msc/ar02.html
    - ars 17y ago
      And this law changes that, so now corporations need to be sent 1099's as well.
aneth 17y ago
This may have been slipped in as a precursor to instituting a VAT.
- gills 17y ago
  As in "see, look! VAT is waaaaay simpler than this tax system. argh.
jared314 17y ago
Sounds like a business idea, for doing e-taxes and e-payments, in the making.
schwit 17y ago
Time to get rid of all federal taxes except a national sales tax. Our Rube Goldberg tax system has got to be the single biggest drag on economy. Imagine the money that goes into complying with taxes doing something constructive.
- kgrin 17y ago
  A sales tax (or VAT) is highly regressive. There's nothing inherently complicated about a progressive income tax; it's the fact that we insist on having a deduction for mortgage interest, R&D, asset depreciation, hiring new workers and hundreds of other things that all individually might be things we want to encourage, but together add up to a complex and cumbersome system.
  - InclinedPlane 17y ago
    A sales tax is not regressive, it's flat. Simply because it's not progressive doesn't make it the opposite.
    - gte910h 17y ago
      A sales tax is regressive. The lower your income, the higher your tax burden as a percentage of income. Even the fair tax understands that which is why most versions of it has a huge tax credit per year.
      - tocomment 17y ago
        A sales tax doesn't have to be regressive. If you tax luxury items while not taxing essentials you'd probably get an even more progressive system than we have now.
        rationalbeaver 17y ago
        That's true, but making a sales tax progressive creates the same complication that exists in the current system, only with even more incentive for corporations to lobby for special exemptions, reclassifications, credits, etc., for the products that they produce.
roboneal 17y ago
And it's not just for $600 or larger transactions, it's an accumulation of said transactions for a tax year. This is going to be a paperwork nightmare.
- ohashi 17y ago
  Well to be fair the original way of doing it was an accumulation over a year, they simply expanded what they were covering. Not saying I am happy about it.
- deleted 17y ago
  [deleted]
- CWuestefeld 17y ago
  Maybe it's intended as a subsidy for the Postal Service.
  - bd_at_rivenhill 17y ago
    It's intended as a subsidy for accountants and tax lawyers. Congress is the biggest example of regulatory capture anywhere: the lawyers always win.
- nrj 17y ago
  I am an independent contractor, and I probably spend more than 600$ at Starbucks in a full year.
shykes 17y ago
When is this effective?
- pmh 17y ago
  All payments after Dec 31, 2011. FWIW, there's already a bill in the House to repeal this section (introduced the same day the article was posted it seems): http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5141 http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5141:
johns 17y ago
Can you imagine how many 1099s a company like Amazon would have to respond to under this system?
- cookiecaper 17y ago
  Or Home Depot, or the grocery store, or your favorite restaurant, or... I understand that the law applies to corporations, but if you take your company out to lunch once a week a handful of times on company money, assuming your company has 10 people or more and your restaurant is ten dollars per plate, you'll have to file a 1099 if you go there for more than six weeks. Or if you buy more than $600 worth of equipment in a year from Wal-Mart or Home Depot or anything like that, you'll have to file a 1099 for them, too. That's how I understand it anyway. Someone please correct me if I'm wrong.
CamperBob 17y ago
How could this possibly have not been noticed before?
- uuilly 17y ago
  Thousands of pages of barely parsable legalese, constantly changing in different places to keep different politicians on board, the final copy rammed through before the ink dried, what could possibly go wrong? From an engineering perspective the health bill was a QA nightmare.
  - rbranson 17y ago
    Rammed through, as in, legally voted for by two legislative bodies and signed by the President, the same way every piece of legislation has ever been since the beginning of the USA?
  - abstractbill 17y ago
    Don't pretty much all bills work this way? Was the healthcare bill really so different to the norm?
    - edj 17y ago
      "Don't pretty much all bills work this way?" Yes. That's why they're generally such train wrecks.
    - uuilly 17y ago
      Not at all. This bill is notable for its complexity, scope and unpopularity. Day by day people disliked it more and more and everyone involved wanted to get it off the TV as soon as possible. When a bill is more popular there is less thrashing. People don't need to desperately alter things to appease individual politicians. Each of those patches is essentially a hack to cover one corner case. This bill is full of them. Popularity equates to a more stable code base. Politicians are also more productive when doing something popular. They are less likely to "grab what they can" and more likely to contribute to the bill's success and thus their re-election. We've all been there... A few nights before a release we realize we have an unmaintainable mess and the deadline needs to be pushed so we can go back to square one. This is what happens when you release anyways.
olefoo 17y ago
If the federal government were to aggressively enforce this it would amount to a default ban on cash transactions between businesses.
- mark_l_watson 17y ago
  That may be the point. I have joked for years that cash would be made illegal, and perhaps now it is not such a joke.
- hga 17y ago
  How so? This provision requires the reporting of a payment; it doesn't say anything about the instrument(s) used to make that payment.
  - olefoo 17y ago
    It simply comes down to convenience. It may not be technically illegal to make cash payments for services or goods, but this would mean that you have to track all such payments and who the payee was, in case you paid more than $600 to a given entity. At which point there's enough paperwork already that cutting a check, or authorizing a funds transfer is easier. So while it wouldn't necessarily make cash transactions illegal, it would make them stand out more and be scrutinized more carefully.
pg 17y ago
This is like a high-res Sarbanes-Oxley. Can anyone figure out who inserted this clause?
- pmh 17y ago
  It was introduced in Senate amendment 2786: http://www.govtrack.us/congress/amendment.xpd?session=111&amdt=s2786 http://www.govtrack.us/congress/amendment.xpd?session=111&#3... It's huge so it's hard to tell who was specifically responsible, but it was sponsored by Sen. Reid and cosponsored by Senators Dodd, Baucus, and Harkin
  - tomjen3 17y ago
    Dodd really needs to have a heart attack, he has been trying to kill startups for the past two years. I wonder who lines his pockets? Anybody know?
    - riffic 17y ago
      opensecrets.org, it isn't hard to find out. http://www.opensecrets.org/politicians/summary.php?cid=N00000581&cycle=Career http://www.opensecrets.org/politicians/summary.php?cid=N0000...
    - pyre 17y ago
      "Sen. Chris Dodd is retiring at the end of the 111th Congress" According to opensecrets...
- ubernostrum 17y ago
  This is like a high-res Sarbanes-Oxley. No, it's not. Last time I was in business for myself, 1099s were more common than physical handshakes. Hell, I haven't been a "business" (in the sense of deriving most/all of my income from my own ventures as opposed to salary) in about five years and I still chew through at least a handful of 1099s every year. They're good documentation, both for yourself and for the IRS, when trying to figure out and then deduct your expenses.
stretchwithme 17y ago
we need to redesign the mess that is our federal government. it is careening towards disaster and the fools in Congress just want to rev the engine.
grellas 17y ago
Bad as this provision is in itself, even worse is the broader idea that such items should be "slipped in" to omnibus statutes that are so indecipherable that no reasonable legislator or member of the public can know all that is in it before it becomes law. It is indecent that such items should pass and get signed into law without meaningful debate as to their implications and without any form of public scrutiny whatever. In the meantime, we the taxpayers are stuck with the consequences.
- soundsop 17y ago
  It is amazing to me how many critical aspects of an open democracy are dependent on rules of house/congress/parliament. This sort of unrelated/obfuscated clause insertion and the 60-vote requirement to defeat a filibuster are two prime examples. Will there have to be constitutional amendments saying1) bills must be clear and address only one topic, and 2) simple majorities shall always rule, expect in pre-specified cases, and no parliamentary rules shall override simple majority in letter or in spirit.
  - koanarc 17y ago
    So Congress can't be trusted to pass simple bills, but they should be trusted to amend the Constitution?
    - pyre 17y ago
      Hey! Prohibition wasn't that bad...
    - jerf 17y ago
      My goodness, could you imagine it? The entire Bill of Rights would fit in the preamble of Amendment 28... quite possibly the entire Constitution as amended. (Because we all know Congress isn't serious about something unless it produces a bill measured in thousands of pages... and stop questioning their wisdom in creating such bills, you ignorant plebes.)
  - ubernostrum 17y ago
mark_l_watson 17y ago
Flip back through the pages of history: during the few hundred years that the Roman Empire was collapsing, the tax collectors became so violent and generally oderous that in some cases Romans living on the geographic fringes of the Empire welcomed invaders because a change of government looked good to them. I expect the same to happen in the USA. Local governments and the federal government need money to operate on. In the best case scenario, two things would happen: drastically reducing government spending on the military and not-so-essential social services, and, slightly raising taxes. Neither of these reasonable things will get done.
- hga 17y ago
  There were also related exactions like forcing people to continue the carrer of their father, because of course that type of job was heavily taxed. This is also thought to be the start of European feudalism. As things broke down and Rome's ability to enforce its will waned, becoming the vassal of a local boss was a way to escape this mess.
ajross 17y ago
Could we maybe have a less partisan analysis? I mean, FTA (no joke): For what purpose? So the spendthrift Congress can shake a few extra bucks out of private industry? The business sector is the generator of America’s high living standards, but most federal legislators just see it as a kitty to be raided or a cow to be milked dry.
larsberg 17y ago
Hopefully this means Apple and AdMob will finally have to send me a 1099 for my iPhone app payments. I'm really sick of gathering the numbers by hand, reporting them as individual income, and then praying I don't get audited and have to provide copies of... CSV files from iTunes Connect that aren't even in local currencies?
fnid2 17y ago
What are the penalties of non-compliance? If you just don't bother with the 1099's, what happens? Fines? More taxes? That's really what we need to know. If there are no penalties, there is no law.
- cschneid 17y ago
  http://www.accountingpartners.com/fines.shtml http://www.accountingpartners.com/fines.shtml Quick google says minimum of $50/per, max of $250k per business.
icey 17y ago
I don't know anything about this mandate, and when I tried to google for more information I could only find citations on right-wing blogs. Nothing in any news source, nothing from an independent source, nothing. Before everyone gets up-in-arms about this, it might be wise to at least try to seek out some real citations. The Cato study may be correct, but it's impossible to tell from the linked story.
- chasingsparks 17y ago
  http://www.opencongress.org/bill/111-h3590/text?version=enr&nid=t0:enr:12100 http://www.opencongress.org/bill/111-h3590/text?version=enr&... The first blockquote from Thomson-Reuters Ria refers to the reconciliation bill section that I linked to via OpenCongress. For tax purposes, RIA is a very good source and is certainly independent. Unfortunately, it appears like you can't read the report for free. However, reading the bill text it does look like the they are saying 1099's are no longer for wages alone. (Bias note: I once worked for Cato.)
  - icey 17y ago
    Awesome, thank you. That looks like it's a pretty good starting point. I just get nervous when I see articles talking about the impacts of a bill and their only sources are other articles talking about the impacts of a bill, and not the bill itself.
sev 17y ago
which an information return to IRS will be required if the $600 aggregate payment threshold is met in a tax year for any one payee What was the minimum amount to be exceeded where a 1099 was needed before this law passed? I've received 1099s for work done around $2000 in 1 year.
- ars 17y ago
  The dollar amount didn't change. What changed is that now corporations need to be sent 1099's, while before they didn't.
spamizbad 17y ago
If Cato's interpretation is accurate, this will likely be repealed. The IRS doesn't have the capabilities to process that many 1099s.
krschultz 17y ago
This won't last. One truth of politics is that pissing off a few people is easy, pissing off everyone is hard. (That's how the rich and youth end up getting screwed all the time). If you force this on literally every single company and contractor in the country you will be losing a lot of campaign donations in the next cycle. If it comes into effect as described it will be modified/repealed within a year.
- pyre 17y ago
  No law gets repealed. They'll just pass a new law that changes the previous one. It's sort of like CSS for Congress... cascading legislature...
  - bitwize 17y ago
    Worse, it's like diffs for congress without any version control: "Title Blah Section BlahdyBlah(c)(4) shall be amended as follows: by striking 'shall not' and replacing it with 'may, phase of the moon permitting', and by striking 'foobars' and replacing it with 'all foobars, foreign and domestic, and any bazes and quuxes appertaining thereto'." The language of the Constitution and its amendments is wonderfully tacit and accessible. Why can't statute law be so? Oh, right, because then it would obviate many uses for lawyers. Can't have that...
petercooper 17y ago
Rule #1 from history class: only trust the primary source. And since none of the main articles about this issue seem to be quoting the primary source in full, here you go: SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS. (a) In General.--Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections: ``(h) Application to Corporations.--Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term `person' includes any corporation that is not an organization exempt from tax under section 501(a). ``(i) Regulations.--The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.''. (b) Payments for Property and Other Gross Proceeds.--Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended-- (1) by inserting ``amounts in consideration for property,'' after ``wages,'', (2) by inserting ``gross proceeds,'' after ``emoluments, or other'', and (3) by inserting ``gross proceeds,'' after ``setting forth the amount of such''. (c) Effective Date.--The amendments made by this section shall apply to payments made after December 31, 2011. From the full text of the bill at http://www.gpo.gov:80/fdsys/pkg/BILLS-111hr3590PP/html/BILLS-111hr3590PP.htm http://www.gpo.gov:80/fdsys/pkg/BILLS-111hr3590PP/html/BILLS...
- bd_at_rivenhill 17y ago
  In this case, the primary source appears to be indecipherable to anyone except for a lawyer who already understands section 6041 of the Internal Revenue Code of 1986 and all of the amendments that have been applied to it since it was enacted, so I'm not sure what good you're doing by quoting it. Maybe we should try to have them put the statutes into git so we don't need to waste lots of time looking at the diffs.
  - petercooper 17y ago
    In this case, the primary source appears to be indecipherable to anyone except for a lawyer who already understands section 6041 of the Internal Revenue Code of 1986 and all of the amendments that have been applied to it since it was enacted, so I'm not sure what good you're doing by quoting it. Most open source code is indecipherable to anyone but a programmer, but seeing it can at least provide some reassurance. Most political and legal processes are indecipherable or opaque to the general population, yet attempting to understand them is a positive thing. Having the primary source to hand is useful to ensure that you're not having the wool pulled over your eyes by a biased secondary reporter. A news site could easily misinterpret legalese. Cato is hardly the National Enquirer, but even so, they only cite a) a tax research paper that costs $75 to obtain, b) a tax CPA whose words are not reproduced anywhere else, and c) the venerable "Air Conditioner Contractors of America." There aren't enough references to primary sources to rule out a less-than-sincere attempt at shaping public opinion (not that that is necessary the case, just that it could be). There's a lot to be said for trusting news sources in order to save time, but taking a look at the primary source yourself in many instances can prove illuminating, and is certainly a responsibility for anyone who's going to proceed to get upset/angry or campaign against whatever the news/article is covering.
DanielBMarkham 17y ago
I hate to be a wag, but the news today about government intervention in small businesses has gone into turbo mode. Is now the time we get out the pitchforks and torches and go up to the castle? Or should we wait a while longer?
- fnid2 17y ago
  I know you are joking and this is something I think about. I heard about a protest at JP Morgan where people where chanting and wanted to deliver a letter to the CEO. However, I really hope it isn't a violent incident. We don't need a war here anymore than we need a war in the middle east. Civil wars are bloody and costly and horrible. My suggestion: Vote out all incumbents.
  - DanielBMarkham 17y ago
    Agreed. I promise to only carry a torch and take notes of anybody I see with a pitchfork. :) I read an analysis once that said that the problem wasn't that representatives weren't responding to the people's wishes, it was that the mob basically ruled. This is why you have governments making more promises than they can pay for and the continuous search for the current Dr. Frankenstein to go storm his castle. Not sure of the veracity of that analysis, but I found it both counter-intuitive and interesting. We're technical guys. We should know complex systems. We should know how people design and interact with complex systems. I believe our system of government is becoming legacy code. That's not by any means to call for violence. I simply mean that the system has become too complex for most practitioners to understand, too complex to micro-manage, too complex to be able to design results by committee, and too complex to be able to maintain effectively. Beats me where you go from there, but after seeing a dozen failed complex computer systems, I know a failed system that is spinning off into complexity land when I see one. I also agree. Vote them all out. Enact term limits now, before we start a new generation of Earls and Dukes -- professional politicians with a lifer mentality.
eli 17y ago
I'm having a hard time believing this is true. The language in the bill itself is totally indecipherable (to me), but the only people claiming it would be a huge burden have a clear ideological or political bias.

140 points by there 17y ago

http://www.theapchannel.com/accounts-payable/node/522 http://www.theapchannel.com/accounts-payable/node/522 From above: Although these changes were passed in the new health bill, they are not new ideas. The White House and Congress have been trying to require corporate reporting for years. The measure was included in budget proposals issued by Presidents Bush and Obama. "This has bipartisan support," says Doug Rogers, director of consulting services at IRSConsulting. "It was never a matter of if, but when."

jrockway 17y ago

Will I really have to submit a 1099 to the IRS for my phone bills, electric bills, rent, etc.? I have a feeling someone misread this.

hga 17y ago
If you are a business, and those payments total more than $600 in a year, yes. According to Cato, many "someones" have read it the same way.
- gte910h 17y ago
  On the plus side, non-compliance is going to be so high at first, I doubt many will be "enforced" about it.
  - bradgessler 17y ago
    You should consider that while some laws are not enforced, it's yet another lever that the government can use against you. In this case, it would probably give the IRS even more broad reaching powers to audit people and businesses for not being compliant.
    - deleted 17y ago
      [deleted]
- jrockway 17y ago
  But what counts as a business. If I write a book and get $5000 in royalties on a 1099, do I have to send Amazon a 1099 for the computer I bought to write the book? Even if I do... not gonna happen.
  - hga 17y ago
    Unless you establish a "business", however that's defined by the Congress and IRS (Schedule C at a minimum? It's been too long since I filed one.), and it pays for the computer, no.
ratsbane 17y ago
That was my thought too. If I buy a car, do I have to send the dealership a 1099? Worse yet, if I spend $601 on gas at the same gas station in $30 chunks, do I have to keep track of the receipts at the end of the year and send them a 1099? What if it's at three different gas stations all owned by the same company. How do I know? Ask for their EIN every time I pay? This would be a complete disaster. Surely this isn't what the bill actually requires?
- hga 17y ago
  Only if it's a company car. And, yeah, this would get into quite a mess. If your company was large enough and paying for the gas, they'd pretty much have make you use a card that would allow them to consolidate the payments with all the other company cars to know if they have to send 1099s.
- deleted 17y ago
  [deleted]

patrickgzill 17y ago

Was it a slipup? Or will it just force more people to form corporations?

hga 17y ago
Won't make a difference, I gather. E.g. previously if you were a business and paid rent to a landlord who was a individual (e.g. he reported that income on his individual income tax forms) you'd have to file a 1099. Now, in all cases, you'll have to file the 1099 (well, unless the rent is less than $600 per year).
- patrickgzill 17y ago
  What I mean is that in most cases, corporations do not have to receive a 1099-MISC from you, no matter how much you pay them. see http://www.irs.gov/instructions/i1099msc/ar02.html http://www.irs.gov/instructions/i1099msc/ar02.html
  - ars 17y ago
    And this law changes that, so now corporations need to be sent 1099's as well.

aneth 17y ago

This may have been slipped in as a precursor to instituting a VAT.

gills 17y ago
As in "see, look! VAT is waaaaay simpler than this tax system. argh.

jared314 17y ago

Sounds like a business idea, for doing e-taxes and e-payments, in the making.

schwit 17y ago

Time to get rid of all federal taxes except a national sales tax. Our Rube Goldberg tax system has got to be the single biggest drag on economy. Imagine the money that goes into complying with taxes doing something constructive.

kgrin 17y ago
A sales tax (or VAT) is highly regressive. There's nothing inherently complicated about a progressive income tax; it's the fact that we insist on having a deduction for mortgage interest, R&D, asset depreciation, hiring new workers and hundreds of other things that all individually might be things we want to encourage, but together add up to a complex and cumbersome system.
- InclinedPlane 17y ago
  A sales tax is not regressive, it's flat. Simply because it's not progressive doesn't make it the opposite.
  - gte910h 17y ago
    A sales tax is regressive. The lower your income, the higher your tax burden as a percentage of income. Even the fair tax understands that which is why most versions of it has a huge tax credit per year.
    - tocomment 17y ago
      A sales tax doesn't have to be regressive. If you tax luxury items while not taxing essentials you'd probably get an even more progressive system than we have now.
      - rationalbeaver 17y ago
        That's true, but making a sales tax progressive creates the same complication that exists in the current system, only with even more incentive for corporations to lobby for special exemptions, reclassifications, credits, etc., for the products that they produce.

roboneal 17y ago

And it's not just for $600 or larger transactions, it's an accumulation of said transactions for a tax year. This is going to be a paperwork nightmare.

ohashi 17y ago
Well to be fair the original way of doing it was an accumulation over a year, they simply expanded what they were covering. Not saying I am happy about it.
deleted 17y ago
[deleted]
CWuestefeld 17y ago
Maybe it's intended as a subsidy for the Postal Service.
- bd_at_rivenhill 17y ago
  It's intended as a subsidy for accountants and tax lawyers. Congress is the biggest example of regulatory capture anywhere: the lawyers always win.
nrj 17y ago
I am an independent contractor, and I probably spend more than 600$ at Starbucks in a full year.

shykes 17y ago

When is this effective?

pmh 17y ago
All payments after Dec 31, 2011. FWIW, there's already a bill in the House to repeal this section (introduced the same day the article was posted it seems): http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5141 http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5141:

johns 17y ago

Can you imagine how many 1099s a company like Amazon would have to respond to under this system?

cookiecaper 17y ago
Or Home Depot, or the grocery store, or your favorite restaurant, or... I understand that the law applies to corporations, but if you take your company out to lunch once a week a handful of times on company money, assuming your company has 10 people or more and your restaurant is ten dollars per plate, you'll have to file a 1099 if you go there for more than six weeks. Or if you buy more than $600 worth of equipment in a year from Wal-Mart or Home Depot or anything like that, you'll have to file a 1099 for them, too. That's how I understand it anyway. Someone please correct me if I'm wrong.

CamperBob 17y ago

How could this possibly have not been noticed before?

uuilly 17y ago
Thousands of pages of barely parsable legalese, constantly changing in different places to keep different politicians on board, the final copy rammed through before the ink dried, what could possibly go wrong? From an engineering perspective the health bill was a QA nightmare.
- rbranson 17y ago
  Rammed through, as in, legally voted for by two legislative bodies and signed by the President, the same way every piece of legislation has ever been since the beginning of the USA?
- abstractbill 17y ago
  Don't pretty much all bills work this way? Was the healthcare bill really so different to the norm?
  - edj 17y ago
    "Don't pretty much all bills work this way?" Yes. That's why they're generally such train wrecks.
  - uuilly 17y ago
    Not at all. This bill is notable for its complexity, scope and unpopularity. Day by day people disliked it more and more and everyone involved wanted to get it off the TV as soon as possible. When a bill is more popular there is less thrashing. People don't need to desperately alter things to appease individual politicians. Each of those patches is essentially a hack to cover one corner case. This bill is full of them. Popularity equates to a more stable code base. Politicians are also more productive when doing something popular. They are less likely to "grab what they can" and more likely to contribute to the bill's success and thus their re-election. We've all been there... A few nights before a release we realize we have an unmaintainable mess and the deadline needs to be pushed so we can go back to square one. This is what happens when you release anyways.

olefoo 17y ago

If the federal government were to aggressively enforce this it would amount to a default ban on cash transactions between businesses.

mark_l_watson 17y ago
That may be the point. I have joked for years that cash would be made illegal, and perhaps now it is not such a joke.
hga 17y ago
How so? This provision requires the reporting of a payment; it doesn't say anything about the instrument(s) used to make that payment.
- olefoo 17y ago
  It simply comes down to convenience. It may not be technically illegal to make cash payments for services or goods, but this would mean that you have to track all such payments and who the payee was, in case you paid more than $600 to a given entity. At which point there's enough paperwork already that cutting a check, or authorizing a funds transfer is easier. So while it wouldn't necessarily make cash transactions illegal, it would make them stand out more and be scrutinized more carefully.

pg 17y ago

This is like a high-res Sarbanes-Oxley. Can anyone figure out who inserted this clause?

pmh 17y ago
It was introduced in Senate amendment 2786: http://www.govtrack.us/congress/amendment.xpd?session=111&amdt=s2786 http://www.govtrack.us/congress/amendment.xpd?session=111&#3... It's huge so it's hard to tell who was specifically responsible, but it was sponsored by Sen. Reid and cosponsored by Senators Dodd, Baucus, and Harkin
- tomjen3 17y ago
  Dodd really needs to have a heart attack, he has been trying to kill startups for the past two years. I wonder who lines his pockets? Anybody know?
  - riffic 17y ago
    opensecrets.org, it isn't hard to find out. http://www.opensecrets.org/politicians/summary.php?cid=N00000581&cycle=Career http://www.opensecrets.org/politicians/summary.php?cid=N0000...
  - pyre 17y ago
    "Sen. Chris Dodd is retiring at the end of the 111th Congress" According to opensecrets...
ubernostrum 17y ago
This is like a high-res Sarbanes-Oxley. No, it's not. Last time I was in business for myself, 1099s were more common than physical handshakes. Hell, I haven't been a "business" (in the sense of deriving most/all of my income from my own ventures as opposed to salary) in about five years and I still chew through at least a handful of 1099s every year. They're good documentation, both for yourself and for the IRS, when trying to figure out and then deduct your expenses.

stretchwithme 17y ago

we need to redesign the mess that is our federal government. it is careening towards disaster and the fools in Congress just want to rev the engine.

grellas 17y ago

Bad as this provision is in itself, even worse is the broader idea that such items should be "slipped in" to omnibus statutes that are so indecipherable that no reasonable legislator or member of the public can know all that is in it before it becomes law. It is indecent that such items should pass and get signed into law without meaningful debate as to their implications and without any form of public scrutiny whatever. In the meantime, we the taxpayers are stuck with the consequences.

soundsop 17y ago
It is amazing to me how many critical aspects of an open democracy are dependent on rules of house/congress/parliament. This sort of unrelated/obfuscated clause insertion and the 60-vote requirement to defeat a filibuster are two prime examples. Will there have to be constitutional amendments saying1) bills must be clear and address only one topic, and 2) simple majorities shall always rule, expect in pre-specified cases, and no parliamentary rules shall override simple majority in letter or in spirit.
- koanarc 17y ago
  So Congress can't be trusted to pass simple bills, but they should be trusted to amend the Constitution?
  - pyre 17y ago
    Hey! Prohibition wasn't that bad...
  - jerf 17y ago
    My goodness, could you imagine it? The entire Bill of Rights would fit in the preamble of Amendment 28... quite possibly the entire Constitution as amended. (Because we all know Congress isn't serious about something unless it produces a bill measured in thousands of pages... and stop questioning their wisdom in creating such bills, you ignorant plebes.)
- ubernostrum 17y ago

mark_l_watson 17y ago

Flip back through the pages of history: during the few hundred years that the Roman Empire was collapsing, the tax collectors became so violent and generally oderous that in some cases Romans living on the geographic fringes of the Empire welcomed invaders because a change of government looked good to them. I expect the same to happen in the USA. Local governments and the federal government need money to operate on. In the best case scenario, two things would happen: drastically reducing government spending on the military and not-so-essential social services, and, slightly raising taxes. Neither of these reasonable things will get done.

hga 17y ago
There were also related exactions like forcing people to continue the carrer of their father, because of course that type of job was heavily taxed. This is also thought to be the start of European feudalism. As things broke down and Rome's ability to enforce its will waned, becoming the vassal of a local boss was a way to escape this mess.

ajross 17y ago

Could we maybe have a less partisan analysis? I mean, FTA (no joke): For what purpose? So the spendthrift Congress can shake a few extra bucks out of private industry? The business sector is the generator of America’s high living standards, but most federal legislators just see it as a kitty to be raided or a cow to be milked dry.

larsberg 17y ago

Hopefully this means Apple and AdMob will finally have to send me a 1099 for my iPhone app payments. I'm really sick of gathering the numbers by hand, reporting them as individual income, and then praying I don't get audited and have to provide copies of... CSV files from iTunes Connect that aren't even in local currencies?

fnid2 17y ago

What are the penalties of non-compliance? If you just don't bother with the 1099's, what happens? Fines? More taxes? That's really what we need to know. If there are no penalties, there is no law.

cschneid 17y ago
http://www.accountingpartners.com/fines.shtml http://www.accountingpartners.com/fines.shtml Quick google says minimum of $50/per, max of $250k per business.

icey 17y ago

I don't know anything about this mandate, and when I tried to google for more information I could only find citations on right-wing blogs. Nothing in any news source, nothing from an independent source, nothing. Before everyone gets up-in-arms about this, it might be wise to at least try to seek out some real citations. The Cato study may be correct, but it's impossible to tell from the linked story.

chasingsparks 17y ago
http://www.opencongress.org/bill/111-h3590/text?version=enr&nid=t0:enr:12100 http://www.opencongress.org/bill/111-h3590/text?version=enr&... The first blockquote from Thomson-Reuters Ria refers to the reconciliation bill section that I linked to via OpenCongress. For tax purposes, RIA is a very good source and is certainly independent. Unfortunately, it appears like you can't read the report for free. However, reading the bill text it does look like the they are saying 1099's are no longer for wages alone. (Bias note: I once worked for Cato.)
- icey 17y ago
  Awesome, thank you. That looks like it's a pretty good starting point. I just get nervous when I see articles talking about the impacts of a bill and their only sources are other articles talking about the impacts of a bill, and not the bill itself.

sev 17y ago

which an information return to IRS will be required if the $600 aggregate payment threshold is met in a tax year for any one payee What was the minimum amount to be exceeded where a 1099 was needed before this law passed? I've received 1099s for work done around $2000 in 1 year.

ars 17y ago
The dollar amount didn't change. What changed is that now corporations need to be sent 1099's, while before they didn't.

spamizbad 17y ago

If Cato's interpretation is accurate, this will likely be repealed. The IRS doesn't have the capabilities to process that many 1099s.

krschultz 17y ago

This won't last. One truth of politics is that pissing off a few people is easy, pissing off everyone is hard. (That's how the rich and youth end up getting screwed all the time). If you force this on literally every single company and contractor in the country you will be losing a lot of campaign donations in the next cycle. If it comes into effect as described it will be modified/repealed within a year.

pyre 17y ago
No law gets repealed. They'll just pass a new law that changes the previous one. It's sort of like CSS for Congress... cascading legislature...
- bitwize 17y ago
  Worse, it's like diffs for congress without any version control: "Title Blah Section BlahdyBlah(c)(4) shall be amended as follows: by striking 'shall not' and replacing it with 'may, phase of the moon permitting', and by striking 'foobars' and replacing it with 'all foobars, foreign and domestic, and any bazes and quuxes appertaining thereto'." The language of the Constitution and its amendments is wonderfully tacit and accessible. Why can't statute law be so? Oh, right, because then it would obviate many uses for lawyers. Can't have that...

petercooper 17y ago

Rule #1 from history class: only trust the primary source. And since none of the main articles about this issue seem to be quoting the primary source in full, here you go: SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS. (a) In General.--Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections: ``(h) Application to Corporations.--Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term `person' includes any corporation that is not an organization exempt from tax under section 501(a). ``(i) Regulations.--The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.''. (b) Payments for Property and Other Gross Proceeds.--Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended-- (1) by inserting ``amounts in consideration for property,'' after ``wages,'', (2) by inserting ``gross proceeds,'' after ``emoluments, or other'', and (3) by inserting ``gross proceeds,'' after ``setting forth the amount of such''. (c) Effective Date.--The amendments made by this section shall apply to payments made after December 31, 2011. From the full text of the bill at http://www.gpo.gov:80/fdsys/pkg/BILLS-111hr3590PP/html/BILLS-111hr3590PP.htm http://www.gpo.gov:80/fdsys/pkg/BILLS-111hr3590PP/html/BILLS...

bd_at_rivenhill 17y ago
In this case, the primary source appears to be indecipherable to anyone except for a lawyer who already understands section 6041 of the Internal Revenue Code of 1986 and all of the amendments that have been applied to it since it was enacted, so I'm not sure what good you're doing by quoting it. Maybe we should try to have them put the statutes into git so we don't need to waste lots of time looking at the diffs.
- petercooper 17y ago
  In this case, the primary source appears to be indecipherable to anyone except for a lawyer who already understands section 6041 of the Internal Revenue Code of 1986 and all of the amendments that have been applied to it since it was enacted, so I'm not sure what good you're doing by quoting it. Most open source code is indecipherable to anyone but a programmer, but seeing it can at least provide some reassurance. Most political and legal processes are indecipherable or opaque to the general population, yet attempting to understand them is a positive thing. Having the primary source to hand is useful to ensure that you're not having the wool pulled over your eyes by a biased secondary reporter. A news site could easily misinterpret legalese. Cato is hardly the National Enquirer, but even so, they only cite a) a tax research paper that costs $75 to obtain, b) a tax CPA whose words are not reproduced anywhere else, and c) the venerable "Air Conditioner Contractors of America." There aren't enough references to primary sources to rule out a less-than-sincere attempt at shaping public opinion (not that that is necessary the case, just that it could be). There's a lot to be said for trusting news sources in order to save time, but taking a look at the primary source yourself in many instances can prove illuminating, and is certainly a responsibility for anyone who's going to proceed to get upset/angry or campaign against whatever the news/article is covering.

DanielBMarkham 17y ago

I hate to be a wag, but the news today about government intervention in small businesses has gone into turbo mode. Is now the time we get out the pitchforks and torches and go up to the castle? Or should we wait a while longer?

fnid2 17y ago
I know you are joking and this is something I think about. I heard about a protest at JP Morgan where people where chanting and wanted to deliver a letter to the CEO. However, I really hope it isn't a violent incident. We don't need a war here anymore than we need a war in the middle east. Civil wars are bloody and costly and horrible. My suggestion: Vote out all incumbents.
- DanielBMarkham 17y ago
  Agreed. I promise to only carry a torch and take notes of anybody I see with a pitchfork. :) I read an analysis once that said that the problem wasn't that representatives weren't responding to the people's wishes, it was that the mob basically ruled. This is why you have governments making more promises than they can pay for and the continuous search for the current Dr. Frankenstein to go storm his castle. Not sure of the veracity of that analysis, but I found it both counter-intuitive and interesting. We're technical guys. We should know complex systems. We should know how people design and interact with complex systems. I believe our system of government is becoming legacy code. That's not by any means to call for violence. I simply mean that the system has become too complex for most practitioners to understand, too complex to micro-manage, too complex to be able to design results by committee, and too complex to be able to maintain effectively. Beats me where you go from there, but after seeing a dozen failed complex computer systems, I know a failed system that is spinning off into complexity land when I see one. I also agree. Vote them all out. Enact term limits now, before we start a new generation of Earls and Dukes -- professional politicians with a lifer mentality.

eli 17y ago

I'm having a hard time believing this is true. The language in the bill itself is totally indecipherable (to me), but the only people claiming it would be a huge burden have a clear ideological or political bias.