While the core goals of the new Patient Protection and Affordable Care Act (PPACA), also known as Obamacare, may be admirable, there is significant and growing concern about the individual provisions of the law. Specifically, the economic consequences of this hastily assembled and voluminous law appear to have not been given due consideration and are only now being fully uncovered. Some of these provisions will have major negative consequences for small businesses. One provision that disproportionately affects small business is the 1099 reporting requirement.
The 1099 component of the new law drastically changes the reporting requirements for all government, non-profits, and businesses, vastly expanding the number of 1099s that each entity must file each year. The new legislation extends the 1099 requirement to include all non-credit card product purchases, in addition to the existing service purchase reporting requirements. Businesses must now maintain a record of all the purchases they make and associate them with the vendor’s taxpayer identification number. In the case that these purchases total more than $600 for the calendar year, the entity will have to complete and file a Form 1099-MISC with the IRS as well as send a copy to the vendor. This reporting requirement also extends to purchases from corporations, which were formerly exempted from the law.
To put this in perspective, let’s take an example of a small landscape business. Let’s say this business has 10 employees and a number of trucks and lawn equipment to service a metropolitan area. Now, suppose the business owner provides the crew team leader with cash to pay for gas for the trucks and equipment. In this scenario, the business owner would have to obtain receipts from his staff and understand and document where and from whom the gas purchase was made. He would then have to determine if any of the gas stations that the crew team leader purchased gas from were owned by the same company, and then aggregate how much gas was purchased from each company. The amount of research and time involved in pulling together this information is significant. And the business owner couldn’t simply wait until the end of the year to see who was paid more that $600; in order to be in compliance with the law, he would have to constantly keep track of all of his company’s transactions.
One might argue that this scenario is reasonable for a large corporation with significant resources, but it is hard to imagine that this burden is appropriate for a small and already stretched business. Small businesses expend limited time and capital resources on growing and remaining viable enterprises and surely do not need to be burdened with new mandates that require critical time to be spent on unreasonable reporting requirements.
Statistics show that job creation and growth overwhelmingly come from small businesses. Small businesses and entrepreneurs are the key to rebuilding our economy and ensuring that America can continue to thrive in the coming years. Repeal of this provision of Obamacare will certainly help support small businesses. Help ensure that these overly restrictive mandates are repealed by signing on to support the repeal of these measures here.
Tim Keough, the founder and CEO of Kinsail Corporation, is an entrepreneur who has founded and built from the ground up several technology-oriented businesses. Mr. Keough’s current company, Kinsail Corporation, is a leading information management and e-commerce company primarily focused on providing services that better enable government agencies to modernize manual and paper processes and fee collection.