Form 1099 repeal fails yet again

December 15, 2010

While waiting for the Senate to get around to its final vote on the deal to extend the current income tax rates, the chair of the Finance Committee took another shot at repealing the new Form 1099 reporting requirement.

This tax task was devised as a way to help pay for health care reform. Specifically, businesses will have to provide 1099 information returns to each payee that the business pays $600 or more during the year.

The reporting requirement takes effect, per the legislation, on "payments made after December 31, 2011," so that gives everyone some breathing room.

Still, as soon as word on the rule spread, opposition mounted.

The reason for the rule is not really at issue. Congress believes the added 1099s would be a great way to backstop payments. The thought is that much taxable money changes hands without being reported because there's no third-party documentation.

I don't doubt that's true. Why do you think so many folks want to be paid in cash?

But businesses, especially smaller ones, and their trade and professional organziatons say that this de facto deputizing of companies as tax police is too burdensome.

Congress actually agrees. But in the spectacular way in which it just can't seem to get its work done efficiently, Capitol Hill has been unable to erase this tax rule.

As usual, the big issue is how to replace the money that the 1099 reporting is estimated to raise.

Sen. Max Baucus, the head of the Senate Finance Committee, has tried a couple of times to repeal the 1099 reporting mandate.

The problem with today's effort was Sen. John Barrasso (R-Wyo.), who wanted his bill substituted with the text of a bill offered by Sen. Mike Johanns (R-Neb.). That convoluted request would have designated unobligated federal funds to be identified by the Office of Management and Budget to cover the cost of the 1099 business reporting repeal.

No dice.

So business owners, you'll just have to wait to see if the 112th Congress can get the job done when it convenes in January.

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