Not many headlines stop me in my tracks, but this one from CNNMoney.com Small Business did. (WARNING: You might want to swig some Peptol-Bismol before visiting the link.)
Currently, we’re all familiar with receiving 1099s at tax time; you’re also supposed to follow up with any client who owes you one. For those of us who hire other freelancers or legal services in excess of $600, you need to send 1099s to them, too. No big deal, it’s part of being in business for yourself.
But the new healthcare law slides a pair of nasty little requirements into your accounting for 2012 and beyond. You’ll now need to:
- Track not just services over $600, but tangible goods you purchase, and
- Send 1099s not just to individuals, but to corporations.
So, spend more than $599 and you’re going to send a 1099-MISC Apple or Dell, after researching their federal tax information. Same with GoDaddy, Staples, Costco, Verizon, Exxon and so on. Regardless of whether you are thrilled or horrified at the healthcare law, there’s no question this will add significantly to your accounting workload. (And you might want to stock up on stamps.) Naturally, our friends in D.C. are saying it’s for our own good, because it will aid in tax compliance to help pay for the new benefits.
Philosophically, I take issue with that concept, or at least with the execution. I pay my taxes willingly, but the process already consumes more than its fair share of my time and energy. $600 is an awfully low threshold nowadays, and this puts a burden on the people least equipped to handle it, in order to “police” scofflaws. I suspect it is laying the foundation for a VAT tax in our near future.
I also suspect it will create more unwitting criminals through tax bureaucracy. This opinion from a respected registered investment adviser, “1099 Mandate from Hell Slipped into Health Bill,” concludes: “Clearly this is insanity. If enacted, it will be the most widely ignored IRS regulation in history.” Time will tell.