Senate Finance Committee Chairman Max Baucus, D-Mont., and Senate Majority Leader Harry Reid, D-Nevada, have introduced and pledged to pass a bill to repeal the expanded 1099 reporting requirements in the health law.

Under the Patient Protection and Affordable Care Act, businesses are required to file a 1099 report with the Internal Revenue Service listing vendors with whom they have paid $600 or more during the tax year.  The provision, which goes into effect on 2012, is projected to raise $19 billion over 10 years.

Businesses, however, have said the new reporting rules would be too time-consuming for them to meet.  Baucus and Reid said Tuesday they hope to pass a repeal of these rules with strong bipartisan support. So far, they have attracted one Republican co-sponsor: Sen. Scott Brown of Massachusetts.

Sen. Mike Johanns, R-Neb., who has been leading the effort among Republicans to repeal the 1099 provisions, said Tuesday he has 55 co-sponsors signed up for his bill, including 14 Democrats. However, his bill differs from the Baucus-Reid bill.

Another Democratic-sponsored bill was introduced Tuesday by Sen. Debbie Stabenow of Michigan to repeal the 1099 requirements. Her bill is identical to a bill introduced in the House by Rep. Daniel Lundgren, D-Calif., which has attracted 233 Republican co-sponsors. Stabenow has also signed on as one of the Democratic co-sponsors of the Johanns bill.

"We have heard small businesses loud and clear and are responding to their concerns," said Baucus in a statement.  “Small businesses need to focus on creating good-paying jobs – not filing paperwork.  Many of my colleagues on both sides of the aisle want to work with the small business community to eliminate these requirements, and it is my hope we can come together to pass legislation quickly."

The legislation would repeal requirements for businesses to report payments made for goods and certain services to the IRS using tax form 1099.

This expansion of the 1099 reporting requirements was originally proposed during the Bush administration to help keep better track of what businesses spend and earn, and of their tax liability. The Treasury Department estimates that a tax gap of more than $345 billion in owed taxes goes unpaid each year.

"Small businesses, the engine of our economy, told us the 1099 provision was burdensome, and we are responding quickly to ensure that they can keep running smoothly,” said Reid.  “Making it easier for small businesses to thrive should be something Republicans and Democrats can agree on. I hope we can come together on common-sense reforms like these to improve a law that is already saving money and saving lives."

As chairman of the Finance Committee, Baucus worked together with the Bush administration to begin crafting the policy, which was designed to collect more of those unpaid taxes and help keep taxes lower for all taxpayers.

However, after the policy was finalized late last year and became law in early 2010 under the health care reform bill, more businesses owners became aware of the new paperwork requirements and raised concerns about the resources that would be required to complete the forms when they would need to begin doing so in January 2012.

Baucus previously introduced legislation to repeal the Form 1099 reporting requirements during the 111th Congress in November 2010, but it failed to pass. Republican-sponsored efforts to repeal the expanded 1099 requirements have also not garnered enough votes yet to pass in the Senate.

Last week, House Republicans passed a repeal of the overall health care reform bill, but an overall repeal of the health care reform law is not expected to go far in the Democratic-controlled Senate.

During his State of the Union address on Tuesday evening, President Obama indicated he was willing to fix the 1099 reporting requirements. "Now, I've heard rumors that a few of you have some concerns about the new health care law," he said. "So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses."


Cohn writes for Accounting Today, a SourceMedia publication.Follow EBN on: Twitter | Facebook | LinkedIn | Podcasts

Register or login for access to this item and much more

All Employee Benefit News content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access