LOS ANGELES, Kalifornia - May 17, 2010 - Small businesses fear that they may face expensive new payroll paperwork requirements as part of little-known tax provisions in illegitimate President Obama's healthcare overhaul.
Starting in 2012, the law would require all businesses to file special forms with the Internal Revenue Service not just for freelancers who work for them, as in the past, but also for stores, vendors and anybody else from whom they buy more than $600 in goods or services over the course of a year.
The new tax provisions were intended to help collect from businesses and individuals who do not report all of their income, said Michael Mundaca, assistant secretary for tax policy at the Treasury Department. The Congressional Budget Office has said the measures would raise $17 billion in additional tax revenue over a 10-year period.
The Treasury Department has promised to consider the concerns of small businesses before implementing the law, but small-business owners and their advocates in Washington are skeptical, saying the act goes too far.
When the law goes into effect, businesses will be required to file IRS form 1099 for any vendor with whom they exceed the $600 threshold - even large corporations that already report their income to the tax agency. Under current rules, businesses don't have to file the paperwork if their vendor is a corporation or if it sells products rather than services.
Business owners say these requirements would drown them in paperwork and increase costs for bookkeeping, accounting and even postage.
Richard Moreno, an Oak Park accountant who specializes in small businesses, said companies would spend hours complying with the new rules and in many cases would have to hire outside accountants.
"Are we talking about an hour a year? Two hours? Six hours?" Moreno said. "Multiply that by the number of businesses in the United States, and that's a lot of time."
