Federal Taxation Issues
Federal Taxation Issues
Background: As a result of the current economic climate, federal, state and local governments are reviewing taxation policy and seeking ways to increase revenues. At the federal level, proposals have focused on programs to generate revenue through greater compliance with federal tax laws. To achieve this goal, the federal government has implemented a significant change in the federal tax reporting system for 2012 by expanding the 1099 reporting requirements. Specifically, all payments for good, materials, merchandise, supplies and other property will need to be reported. These changes will likely cause the 1099 reporting volume to increase significantly for most companies. ASID opposes this change because it will disproportionately increase the reporting burden on small businesses.
Talking Points:
- Additional 1099 requirements would place a disproportionate burden on smaller firms because they do not have the same resources as larger firms (e.g. in-house legal and accounting services). This will limit small business development.
- The expansion of information reporting is so burdensome to small businesses that it will significantly contribute to limiting job creation and overall growth.
- The information collected on the 1099 forms will not be helpful to the IRS in collecting unpaid taxes by vendors because it will be difficult to reconcile payments reported on the firms and income reported by the vendor.
- Businesses providing services or selling property may face backup withholding on payments made to them if there is a problem with the TIN, further increasing costs to small businesses.
- There is no evidence that the increased reporting requirements will actually increase revenues; rather, they will only serve to increase costs to small businesses that are tax complaint.
Action: ASID urges its members and coalition partner to support deferral legislative language to strike section 9006 in the 2010 Health Care Act because the provision imposes extremely burdensome information reporting requirements on business taxpayers.
More information:
ASID Legislative PolicyBackground on LegislationState Taxation IssuesFederal Taxation IssuesMyth vs FactLegislative Terms
