Balancing Act

Back in November I wrote about the potential PITA that was to become 1099 reporting in 2011. In case you forgot or blocked it from your mind, you can find the post here.

As part of the Health Care Reform the federal government was requiring all expense payments to be reported on 1099 filings. As you can imagine, this created a potential challenge for businesses as this type of reporting could be expensive and difficult to manage.

...

The theory was that the federal government was going fund the cost of the national health care plan by capturing payments made to independent contractors as well as all outside vendors.

This reporting structure would essentially force businesses to file a 1099 for every entity they did business with for the year. In effect, this would allow the IRS to cross reference all of the 1099’s filed for each company against the vendors’ annual tax return.

Shockingly, there is a feeling in D.C. that some of us are not claiming all of our earnings.

The expanded 1099 reporting requirements were designed to help the IRS track income that was under-reported. Unfortunately it was going to make it the responsibility of the paying party to report every dollar spent.

Apparently, Congress got the word that this was a near impossible hurdle for businesses to jump through. Almost every business would have failed to be in compliance with these requirements.

With the blessing of Congress and President Obama we are now getting a break from this productivity stopper. Now the reporting requirement is basically the same as it has been for last year.

So while it is not the kind of break we usually think of when we think of taxes, we certainly welcome the break all the same.