This is crazy:
[B]eginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.
The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.
Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.
But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.
What possible connection does this have to health care? It turns out, it's just budgetary. Requiring the issuance of 1099s by all businesses to virtually everyone it buys from is supposed to (a) deter businesses from expensing things that aren't really deductible and (b) help catch people and businesses which are underreporting income. This allowed an increased revenue projection that would offset part of the cost of the bill.
As I said, this is insane. The bookkeeping requirements alone are impossible. Tracking expenditures by vendor is just beyond the ability of most small businesses, not to mention getting and recording taxpayer ID numbers. Can you imagine? "Who was that guy we hired to paint the outside of the building? I can't remember. Wasn't he somebody's cousin?"
If this isn't repealed, the net result is that hundreds of millions of additional tax documents will be generated every year. As far as I know, even that number might be understated. This means that before filing a tax return, every business will have to wait for their 1099s to come in from every business customer - even if they don't anticipate a 1099 from a particular person because they didn't know they were buying for a business purpose!
The example of a coffeeshop is illustrative. If I buy coffee for clients throughout the year and expense it, eventually I will get over $600. I have to issue a 1099 to Starbucks?? Apparently so. Okay, so it's February and I need the taxpayer ID number and corporate mailing address from the coffeeshop. Right now, in a 1099 situation, you have the payee complete a form giving you that info, and it isn't onerous because it's rare. Is every Starbucks going to have that info posted in the window now? Because remember, I have to repeat this process with every vendor, and every vendor has to provide the information to every customer.
I can't just rely on the name of the place to determine whether I have to issue a 1099. Some restaurants are owned by franchisees, others owned by the franchisor. If I go to 19 different places with the same name on the door throughout the year, I'd have to figure out which are owned by whom to determine if they get a 1099! And businesses change hands all the time. What if the taxpayer ID number changes during the middle of the year because the place got sold? Assume I spent $400 there when it was owned by the first company and another $400 when it was owned by the second. Total expenditures for the year at that place are over $600, but the corporate identity of the vendor has changed. Issue a 1099 or not? Also, the first company has gone out of business. What's the point?
Either businesses will spend thousands of dollars dealing with this crap or they will just ignore the whole thing and pray they don't get caught. I don't know what's worse. Of course, if any small business with a decent amount of income doesn't file thousands of 1099s, the IRS will immediately suspect something is up. It's like the Form 27B/6 from Brazil.
Instead of blanketing the country in paper, if you need to raise revenue to pay for the law, then do it some other way.