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U.S. Senate Fails to Repeal Onerous 1099 Reporting Mandate

Posted by Christopher Geehern on Dec 3, 2010 9:16:00 AM

The U.S. Senate failed this week to repeal a provision of the health reform law that will require businesses to file 1099 tax forms for every vendor that sells them more than $600 worth of goods and services.

1099 reporting mandateSenators Monday considered two competing amendments to repeal the 1099 rule, but neither version received the 67 votes needed for passage.  An amendment sponsored by Montana Democrat Max Baucus failed on a 44-53 vote, while a separate measure sponsored by Nebraska Republican Michael Johanns that would also have cut federal spending by $39 billion lost on a 61-35 count.

Two similar amendments to rescind the 1099 mandate failed in September. Some observers now believe that the Senate may not address the 1099 issue until 2011.

Massachusetts Senator Scott Brown, who expressed strong support for repeal during remarks to the AIM Executive Forum on November 19, supported both the Baucus and Johanns amendments. Senator John Kerry voted in favor of the Baucus amendment and against the Johanns proposal.

AIM believes the 1099 provision would saddle employers with significant administrative and accounting expense at a time when many are already struggling with the soft economy. Implementation of federal health care reform will be a long and difficult road without the support of our nation’s small businesses.  Imposition of the 1099 requirement on small businesses in 2013 could derail support for the majority of the reform bill effective in 2014.

The mandate, due to take effect in 2013, will require more than 30 million U.S. companies that currently only have to tell the IRS the value of services they purchase from vendors to also report the value of goods and merchandise they purchase. Lawmakers added the 1099 reporting footnote to the federal health reform bill in an effort to fund a portion of the massive overhaul.

The Senate’s Joint Committee on Taxation estimates that repeal would reduce federal tax collections by $19.3 billion.

President Barack Obama recently signaled his willingness to reconsider the mandate.

“You know, for example, I know one of the things that’s come up is that the 1099 provision in the health care bill appears to be too burdensome for small businesses.  It just involves too much paperwork, too much filing,” the president said in his press conference the morning after mid-term elections.

Topics: U.S. Senate, Associated Industries of Massachusetts, Health Care Reform, AIM, Taxes

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