1099’s Need Surgery

Thus far I have tried, and mostly succeeded, to stay out of the health care debate. This is mostly because I haven’t actually read the bill or fully educated myself on it so, from my experience, I am unable to intelligently debate the subject. That was true until today…

Yesterday I received the December issue of Grower Talks, perhaps my favorite greenhouse business magazine. While sitting in my office chair I came across an article on page 21 titled “Increase in Penalties for Failure to File Information Returns”. I am unable to find a link to the article in Ball’s site, so here it is:

“Unfortunately, the new small business jobs bill does not repeal the expansion of the 1099 reporting requirements passed as part of the new health care law. Starting in 2010, every business owner must issue forms 1099 to vendors of goods or services to which the business owner paid more than $600 annually. SAF (“Society of American Florists”, a greenhouse/florist lobbying group) is working to repeal the 1099 provision because it poses an enormous administrative burden on our members”.

Boy did this light me up.

Having been employed in Information Technology for the past 18+ years I understand the need for 1099’s, I have hired them and have been one. For those of us that are W-2 employees it (mostly) helps to keep independent contractors honest in their reporting of income. Like most people, I don’t like paying taxes, pay more than I should but I am honest to a flaw with reporting income. I know what happens when you piss the IRS off. I’ve seen it first hand.

However, to require business owners to report EVERYTHING over $600 annually across the board is ridiculous at best. If you don’t believe me, Google “1099 healthcare” and see what you get:

• “Health care law’s massive, hidden tax change”
• “Health-care Bill Surprise: 1099 Nightmare”
• “Small business threatened with 1099 tax form tyranny provision”
• “Health care bill includes Form 1099 Frankenstein”
• “Health Care Bill’s 1099 Reporting Burdens Business”
• “Health Care Law’s Hidden Tax Provision: 1099s Could Quintuple in  2012”

I have yet to read the plethora of pages regarding this part of the bill, but my immediate thoughts are:

1. What do 1099’s have to do with health care and why the hell is it attached to that bill?
2. How does me, as a small business owner, reporting a purchase of say a $700 furnace from a business that already reports profits from that sale help anyone?
3. How many additional IRS agents will be necessary to process the MASSIVE increase in paperwork and how much will they cost? From just my small business alone they will probably receive 25+ new pieces of paper.
4. Does Congress really believe this will result in additional revenue? I’m guessing that’s what they think and are after. What’s the NET revenue generated after cost?
5. What will be the loss of productivity for business and their cost to comply? Or, are they counting on that and hope to generate additional revenue from fines?

Since 1099’s have *nothing* to do with health care, I will also diverge to that subject for a bit…

I understand the need for health care reform, and “need” really isn’t a strong enough word. The following are not  Congressional talking points, they are REAL and in MY HOUSE:

• Our rates are going up 10% in 2011. They have done that consistently over the past 5 years.
• Cost for my wife’s CVID treatment has risen 500% over the past 10 years.
• 50% of the doctors listed in our HMO plan are no longer accepting new HMO patients. Don’t try to find an immunologist covered in the entire Chicago area. There’s 1.
• My mother’s (just for her) Government Run part A, B and D Medicare costs are the same as my privately run HMO for my entire family.

Now back to the 1099’s. I am a small business owner, a $1 startup in our back yard that we are building by hand (literally). I work a full-time job in addition to this and during the busy season I work 90+ hour weeks. 100% of our profits are put back into the business. If there’s not enough in the business, it comes from our pockets. If I had more money in my pocket, I would invest it in the business.

We cannot afford an accountant for everyday things like entering sales orders, purchase receipts and the like, we do it. For the past 3 years I have spent my Christmas vacation living in QuickBooks getting ready for tax time. Like many other small business owners, I wear every hat at some time. I DO NOT HAVE TIME TO FILL OUT 1099’s FOR THIS CRAP. I’m not complaining, that’s just the say it is.

Let me be clear on this: the time I will spend on 1099’s is time I am not building my business. If I’m not building the business I will not increase sales. If I do not increase sales I will not hire help. If I do not hire help unemployment will stay at 10%. 10% unemployment does NOT increase tax revenue.

And guess what Uncle Sam, I’m not the only one. All these people, including the President,  keep saying that the majority U.S. jobs come from small business, well, how about you start acting like it?

Fact: I continue to maintain a full-time job because I cannot afford health care on my own for my family. If there were affordable small business or personal health care I would leave my job, build the business faster and hire full-time employees. Perhaps we should say that repealing the 1099 part of the health care act is “stimulus”, that seems to work for everything now.

There, I sort of feel better now.