Senate Small Business Tax Bill passed

[veritas]

http://www.foxnews.com/politics/2010/09/16/senate-passes-b-small-business-tax-lending-package/

Interesting health insurance deduction for the self employed.

[taxmandan]

Nice, hopefully it will be extended and made permanent.

"The measure also would allow small business owners to deduct the costs of health insurance for themselves and their families from self-employment taxes, but only for the 2010 tax year."

[solomon]

Section 2101 of the Bill now treats one receiving income from real estate rents as engaged in a trade or business for 1099 reporting purposes starting next year. That is to say, the Landlord will have to issue a 1099 for expenses paid to someone if amount reaches the threshold.

[BHoffman]

Gonna be a lot of unreported rental income, I'll bet.

[Nashville]

Painting the Barn

Shagnasty: "I'll paint your barn for $1000."
LandBaron: "Sounds good. I'll need your SS# so I can give you a 1099."
Shagnasty: "Oh no, I'm not going to get into that."
LandBaron: "We have to. If I can't report it, I can't deduct it."
Shagnasty: "If you're gonna have to do that, then the price goes up to $1800."
LandBaron: "I can't justify $1800."
Shagnasty: "Then find you someone else."

LandBaron goes 2-3 more years before painting the barn. This is how taxation stops the economy from running. His money just sits in the bank, Shagnasty loses work, Baron doesn't spend the money, paint store loses a sale, etc.

Does this happen with every single transaction? Of course not. But the pressure is applied like an albatross hung around the neck, and many transactions actually will not happen. To their credit, people actually DO practice tax avoidance more than we think. And they should.

[Burke]

Section 2101 of the Bill now treats one receiving income from real estate rents as engaged in a trade or business for 1099 reporting purposes starting next year. That is to say, the Landlord will have to issue a 1099 for expenses paid to someone if amount reaches the threshold.

Well, that IS interesting. I have always done this. Didn't know it was exempt.

[newbie]

I may be a lone duck, but I don't think the 1099MISC reporting for landlords is such a bad idea. There are many reputable companies that carry themselves as a business,have liability insurance and pay taxes on their income. I feel Shagnasty should have to pay taxes on the money he earns just like I do and I don't feel sympathy that now there is a trace so he'll need to comply or suffer the consequences. JMO

[Jiggers]

Tax avoidance or Tax evasion?

Shagnasty: "I'll paint your barn for $1000."
LandBaron: "Sounds good. I'll need your SS# so I can give you a 1099."
Shagnasty: "Oh no, I'm not going to get into that."
LandBaron: "We have to. If I can't report it, I can't deduct it."
Shagnasty: "If you're gonna have to do that, then the price goes up to $1800."
LandBaron: "I can't justify $1800."
Shagnasty: "Then find you someone else."

LandBaron goes 2-3 more years before painting the barn. This is how taxation stops the economy from running. His money just sits in the bank, Shagnasty loses work, Baron doesn't spend the money, paint store loses a sale, etc.

Does this happen with every single transaction? Of course not. But the pressure is applied like an albatross hung around the neck, and many transactions actually will not happen. To their credit, people actually DO practice tax avoidance more than we think. And they should.

Sounds to me that there is a difference. Tax avoidance is OK, tax evasion goes to jail. Not reporting income is evasion.

[solomon]

Well, that IS interesting. I have always done this. Didn't know it was exempt.

Previously under §6041 only a trade or a business was required to do so. This would not become effective until 2011.

And, Congress finally caught up with the preparers - cell phones will no longer be considered Listed Property - effective for 2010 and thereafter.

[erchess]

Go to electronic money and

tax all income without discrimination as to its character and there's no more tax evasion. We have the technology and it would be so simple.

[Snaggletooth]

Avoidance vs Evasion

Getting paid to paint the barn and then not reporting it is evasion.

Refusing to paint the barn because you cannot collect enough to justify paying the tax burden is avoidance.

[Burke]

Previously under §6041 only a trade or a business was required to do so. This would not become effective until 2011.

I suppose I considered my rental client who owns 3 apt bldgs and manages them, as a trade or business. The ones who have one rental house across town (usually that they used to live in) I did not.

[Snaggletooth]

Strange

Burke, like yourself I have always issued 1099s for Rental "Business."

If we weren't supposed to be doing this, why is there a box on Form 1099-MISC for "Rent?"

[Burke]

I think the poster was referring to payments to non-corporate vendors who perform work for the rental property. Such as plumbing, carpentry, electrical, repairs, etc., which I do, as non-employee compensation, Box 7. I also do 1099MISC for "Rents" to landlords for whom rent is collected by a real estate agency. An individual renter did not have a requirement to report rents to their landlord. Has that changed?

[solomon]

An individual renter did not have a requirement to report rents to their landlord. Has that changed?

There is nothing in this Bill that would change that.