In cases you didn’t read the entire healthcare bill (did anyone?), one provision will certainly hurt small businesses. Starting in 2012, all businesses will be required to issue 1099-MISC forms to every vendor where they spend more than $600.
Congressman Dan Lungren of California is fighting back. He introduced “The Small Business Paperwork Mandate Elimination Act” which will remove section 9006 of H.R. 3590.
My last post talked about the long-term goal of making all spending trackable, i.e., to improve the government’s ability to collect taxes–and information.
I also speculated that a small business with 50 vendors would need one full day to fill out all of these forms, or spend $1000 with an accountant.
One thing I didn’t mention was the unintended consequence of vendor consolidation. Many businesses will cut their small vendors and purchase many things from a few big vendors.
Not only will this hurt small businesses with the burdensome, costly paperwork requirement to “prove” the expenses they already deduct, but it will force many small businesses out of business when they are cut from the vendor list of many companies that don’t want to deal with the paperwork of too many vendors.
I can see the attractiveness of grabbing an alleged $17 billion in additional tax revenues, presumably from tax cheats. But what I can’t understand is why the government is using such a heavy handed approach with so many detrimental consequences.
Why not hire a few more auditors and check more tax returns for cheating? Our tax system works on the honor system. Let’s continue to treat small businesses with honor and repeal this misguided legislation.
The Idea Works 