Closing the tax gap with more 1099s

Beginning in 2012 businesses will be required to report all payments in excess of $600 for services or merchandise to the IRS on form 1099, even payments to corporations.  This was slipped into health care reform and is expected to raise $17 billion over the next 10 years (helping health care reform appear more revenue neutral).

This additional reporting is expected to help close the tax gap by making it harder for businesses and individuals to under report income.  The IRS is awaiting instruction from HHS on how to enforce the reporting requirement, as HHS is charged with interpreting anything under the purview of health care reform.

My concern is the administrative burden and cost of compliance this will place on small businesses.  Businesses are already burdened by the cost of administration of many other taxes and tax compliance issues without dumping even more on them.  Unfortunately, too many people have taken the “no 1099, no income to report” stance, and now we are sadly reduced to this.

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Comments

  1. Dude, this blew me away when I read it. I’m hoping it gets repealed before 2012. We’ll see.

    See ya on twitter. I’m at @JasonMBlumer. Buds with @JodyPadarCPA. She’s nuts.

    Peace.

    Jason

  2. I really hope it gets repealed too, but I think they almost have to keep it now to keep the healthcare reform “revenue neutral”. More assurance that I will not be short on work anytime soon – the government will always make more for me. I’m honestly more concerned about the sincerity they’ve been using in talking about VAT for America.