Taking 1 Step Forward and 1099 Back

December 2, 2010 at 1:13 pm Leave a comment

The business community was dealt another blow Wednesday as the Senate defeated two measures that would have repealed a dreaded tax reporting mandate from the healthcare reform act.   The provision, beginning in 2012, is that all businesses will be required to issue 1099 forms not only  contracted workers but to ANY individual or corporation from which they purchase more than $600 dollars in goods and services in a year. 

To put this in perspective, if your business spends more than $600 dollars at an airline, rental car company, hotel chain, box store, etc., you will be required to issue 1099’s to all of these organizations.  The amount of paperwork associated with this nonsensical provision will be astronomical and contrary to what the government claims will not result in any measurable improvement in compliance. Rather, it will incentivize businesses to emphasize cash only and bartering transactions which will reduce government revenues.

If those who passed such provisions understood how businesses operate, they would recognize that this draconian mandate will stifle economic growth while serving to prolong the chronic unemployment that has swept our nation.   Many businesses will scale back their operations so as to not incur costs that may put them over the $600 dollar threshold. 

In simply looking at my business expenses during the past year, more than $600 dollars has been spent with dozens of providers that currently don’t require a 1099.   Delta, Jet Blue, US Air, Southwest, Avis, Hertz, Hilton, Best Buy, Wal-Mart, Costco and the list goes on.   What first comes to mind is a scaling back of travel expenses, but if I opt to drive instead of fly, will I then have to send a 1099 to Shell or Exxon Mobil for gas, Nationwide for insurance or Goodyear for new tires?  

Herein lies the problem of having far too many people that don’t understand the private sector passing laws that impede economic growth and job creation.   With chronic, double digit unemployment and underemployment, the focus should not be on more bureaucracy, but rather the elimination of the very red tape that has led to the current economic climate. 

While the new 1099 mandate may not be headline news, it is something that everyone should be paying very close attention to, as it has the potential to not only undermine a much needed economic recovery but fundamentally transform the way businesses interact with one another, leading to even more Americans getting kicked to the curb

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Christopher Tidball is the author of Kicked to the Curb: 20 Essential Rules For Coming Out On Top When Your Life Has Been Turned Upside Down.   He provides businesses and individuals with innovative strategies to reduce debt, identify new revenue streams and become financially independent.   Learn more at www.christidball.com.  

 

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Chris Tidball is a claims and revenue management consultant and author of the "20 Essential Rules" series of self and organizational improvement books. You can ask him a question at chris@christidball.com

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