Last year with the passage of Obama care (a.k.a. the Patient Protection and Affordable Care Act of 2010) small businesses owners around the country expressed concerns that the changes in the law would adversely impact their businesses too significantly. Following the passage of Obama Care, small businesses owners learned first-hand the impact was even more substantial than expected.
The changes in the law required all businesses to file 1099 forms for purchases or payments of $600 or more in a reporting year. This was a significant change from the status quo which required 1099s only for such payments to independent contractors or firms that are not corporations or partnerships. IRS attorneys and other tax professionals agreed the new law would have literally required 1099s for all payments of $600 or more to anyone.
So, if your business bought gas at the neighborhood station, for example, and assuming you spend more than $600 a year, under Obama care you would have had to 1099 your local gas station. If you used a cable service to access the internet and it cost your business $600 or more a year for that service, you would have been expected to 1099 your cable company.
According to IRS attorneys and others, the articulated purpose of the new 1099 requirement was to capture what lawmakers thought might be as much as $17 billion dollars in fines and revenue lost due to under and/or non-reporting. The lawmakers’ theory being that if the federal government could collect all or most of this $17 billion dollars that it could then be used to help pay for national healthcare.
What the lawmakers did not appear to consider, however, was how the legislation affected small businesses. The new 1099 requirement created a horrendous burden on thousands of small business owners struggling to deal with a mountain of new, and costly paperwork. In response, Republicans repealed the requirement and wrote new legislation to recoup the $17 billion dollars through other means.
Other problems with Obama Care included a purported tax credit which was so limited that virtually no business would qualify. Small businesses seeking waivers from the requirements of Obama Care (i.e. because forcing the business to drop its existing healthcare coverage could cause harm) argue the legislation really favors larger corporations and unions. What’s more, the expense associated with seeking a waiver is cost prohibitive for many small business owners.
In the end, small businesses owners must remain vigilant of changes in legislation affecting their companies. If they have questions, they should seek help from a competent tax lawyer or other tax professional. Small businesses owing back taxes, or having unfiled returns should be proactive in managing their tax liabilities. There are options such as an offer and compromise, or a payment plan for business owners struggling to get current on their back taxes.
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