The Only Fix for this Filing Burden is Repeal

By September 14, 2010Health Care, Taxation

The Obama Administration on Monday signaled its support for amending the onerous tax filing mandate included in the new health care law, which requires any business making purchases of more than $600 from a vendor to file an IRS 1099 to report the exchange. It’s a paperwork nightmare — especially for small business — that the IRS estimates could hit 40 million businesses.

Unfortunately, while acknowledging the problem, the Administration has only endorsed the amendment sponsored by Sen. Bill Nelson (D-FL) that would lift the filing threshold from $600 to $5,000 and apply it only to companies with more than 25 employees.

Talk about an anti-jobs message. Say you’re an small business owner with 22 employees. You really want to expand your product line, have the financing to buy the equipment, but will need to add six new workers to operate the machinery. But then you see that the new hires will push into past the threshold requiring the additional IRS filing. Not only are the burdens and costs of the new paperwork a disincentive, there’s the increased potential error and IRS liability.

Forget it, you say. I just won’t bother.

Isn’t this obvious? The Nelson amendment discourages the growth of small business, which is supposed to drive hiring in the coming years. The National Association of Manufacturers instead supports an amendment sponsored by Sen. Mike Johanns (R-NE) that would repeal the provisions.

In acknowledging the problem, the Obama Administration has at least expressed a willingness to amend the new health care law. It’s not sacrosanct, which is a big political concession.

But the only cure for this horrible IRS filing requirement is its repeal.

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