Repeal of 1099 provision

[Edsel]

All of us are interested in the Repeal of sending 1099s to everyone for the 2012 tax year.
Although some of us may view this as an opportunity to charge a buncha money for this service, I can't imagine any of us who look forward to this.

What causes me a headache is why "we the people" can't find out where these things come from. The "answer" is the Senate Finance Committee approved it, but WHO? Another example is a recent post by John H telling us legislation is sponsored by a top Democrat who wants this provision removed. When I followed the links I also found:

Senator Mike Johanns (R-Neb) and Senator Bill Nelson (D-FL) both proposed that this onerous provision be repealed, but "neither measure passed." The article went on to say that the US Chamber of Commerce produced 2434 signatures from business and trade associates in all 50 states in favor of repeal.

My big beef (today) is WHY CAN"T WE FIND OUT why "neither measure passed?" Why can't we take names of those who voted against the measures? They hide behind committees and the press doesn't really give us anything from any of these politicians except rhetoric.

This is not a secret strategic military exercise against an entrenched military enemy. Why the cloak and dagger?

[joanmcq]

I'm just curious because I don't find this measure all that onerous. Would you see to balance the budget:

Bringing into compliance more of the underground economy?
Losing the mortgage interest deduction?
The Child tax credit?

What do you want to cut? Where do you see revenue being raised?

[Edsel]

Black Hole

Joan, the positive effects brought on by compliance end up in a black hole.

If this measure alone were to bring in $300 billion, they would only spend $300 billion more. The deficit problem is not because they don't have enough revenue, it is because they will overspend what they have regardless of what they bring in.

How effective will the "matching" process be within the operation of the IRS with literally billions of these 1099s to process? Where will the fallout from the inefficiency occur?

One place for the "fallout" to occur is where it is already occurring. Payers receiving letters from IRS to back-up withhold on people who are no longer in the country, mis-identified because their name doesn't match, or whatever. Payers do not respond and there is no follow-up by the IRS. Instead of backup withholding, they simply pay a third party, or maybe don't even do business with that recipient anymore. Yes, the "matching" process is causing its share of truculance, but how much money is really being collected?

Issuing letters to people who pay Home Depot, Pratt & Whitney, or even local retailers will be even more non-productive. Government bureaucrats who hatched this idea do not live in the real world.

What WILL work, and bring about the changes you seem to want: IRS auditors who get off the butt, get out into the field, and seriously collect taxes instead of waiting years for computer systems to work, and hope their computers will somehow collect all this money for them.

[veritas]

Cuts

I'm just curious because I don't find this measure all that onerous. Would you see to balance the budget:

Bringing into compliance more of the underground economy?
Losing the mortgage interest deduction?
The Child tax credit?

What do you want to cut? Where do you see revenue being raised?

No more dept of eductaion.

No more dept of energy.

Sell or give back the other half of my state that the feds own.

for starters...

[DaveO]

Problem is this program is backwards. The result will be small businesses sending 1099's to big multinational corporations. The painter or rental property owner that has to 1099 Home Depot comes to mind. Of what use is this information going to be? I didn't think under reporting was a big problem amoung the big boys and if it was are not most of them on fiscal years where the little guy is going to report on a calendar year?

This is the result of having people with no business experience make laws for businesses.

[joanmcq]

Maybe we should keep the dept of "eductaion".?
Now issuing 1099s to Home Depot, Inc. is probably not going to change the amount of income Home Depot reports. Home Depot is not why this regulation was proposed. However, issuing 1099s to Joe Smith Consulting, Inc. just might cause Joe to report more income. It is not so much the expenses that are being tracked, but the recipient. I'm all for reigning in S-corp abuses. Or Mac the Plumber supply house.

For landlords to issue 1099s, I can tell you personally a few people that would have to file who haven't for a long time.

Spending has been bad. But when all the tax rates were cut back in 2002, the cuts were unsustainable. The GAO figures released at the time showed that. Factor in two wars that haven't been paid for, and the financial collapse (due to the relaxing of financial regs that were put in place back in the Depression to prevent just such a thing).

Everyone wants a free lunch. TAANSTAFL.

[luke]

joan

I understand that you (we all) would like to reduce the debt but as earlier posts clearly show THIS will NOT really help reduce the debt and will be an expensive, time consuming, futile effort that will be MORE of a hassle to EVERYONE involved in the preparation of and reporting of 1099s!

[Mo Sheets]

Hmmm....just a thought!

I say let's give them a taste of their own medicine. Let's send a 1099 to each member of Congress showing that we paid them "non-employee compensation" of whatever our tax bill is this year. Gee, they weren't MY EMPLOYEE....if they were I would have fired them a long time ago!!! LET THEM see how hard it is to get paperwork changed with the IRS when it is not correct.

I, for one, am absolutely DREADING this whole 1099 thing come January, 2012. Let me count the ways:

1) Sorting out who was paid...well, this month the client paid Staples for office supplies with their credit card (o.k....don't need to report if they pay with a debit or credit card), next month they pay Staples cash via petty cash....the following month they pay Staples with a check....

2) Not only will you need to issue all of these 1099's, you'll need to make sure your client verifies all of the 1099's they will be RECEIVING are correct as well.

3) What about the restaurants? Will the businessperson who entertains clients at a particular restaurant, spending more than $600 in a year, will he or she need to issue a 1099 to the restaurant for the cash they paid for meals. O.K....now who is going to verify THAT ONE?????

Just an example of some of the bizarre logic going on in Washington these days. I would support having ALL INCOME taxed for Social Security and Medicare. Just think, if Brad Pitt or George Clooney had to pay into the feds for FICA/Medicare when they make $20 million per movie.

I would also go for limiting aid to other countries. If we are running a deficit, we can't give away money WE DON'T HAVE. Yup, I think this would help.

What about making it mandatory that Washington has to have a BALANCED BUDGET EVERY YEAR? No money....no spending.

O.K....off my soapbox and off to bed! Slo Mo

[Uncle Sam]

More to It

It wasn't mentioned that 1099 reporting on a calendar year wouldn't match up to corporation fiscal years, or that the 1099s will INCLUDE amounts for sales tax, transportation charges, other misc. taxes, where even if both entities are on the calendar year basis - it still won't match.

Also - using Staples - what about if you use two different franchise stores - you need to issue 2 different 1099s?

What a nightmare.

[AZ-Tax]

Could something positive evolve from the 1099 provision?

Some good points raised in the conversation and there is one that I mentioned in another thread on this same topic that I don’t believe was mentioned. While I not a bookkeeper (BK) other then my own books, I have several small business (SB) clients that either need to drastically improved this thing the SB refers to as their books or hire a (BK) If the new law forces those SBs to do one or the either, that to me a very positive result of law but some of my, SB’s will find it rough to afford a BK thus I would have liked to seen, subject to AGI phase outs, a partial “tax credit” attached to the bill for the SBs BK services. Yes I understand BK services are tax deductible and the partial tax credit would be in addition to the deduction. Yes, those SBs that qualify, will get their cake and eat it to (excuse me the political part of me came out for a second). The tax credit is only valid if you hire a BK otherwise some of the SMs may try to trick the IRS into the tax credit by purchasing QuickBooks and never open the box. So how do we pay for it, well I am not a believer in this “we need to pay it” for I believe its bogus rhetoric talk from all political parties and beside, what is all this talk about helping out the SBs.

[Gary2]

1) Sorting out who was paid...well, this month the client paid Staples for office supplies with their credit card (o.k....don't need to report if they pay with a debit or credit card), next month they pay Staples cash via petty cash....the following month they pay Staples with a check....

...
3) What about the restaurants? Will the businessperson who entertains clients at a particular restaurant, spending more than $600 in a year, will he or she need to issue a 1099 to the restaurant for the cash they paid for meals. O.K....now who is going to verify THAT ONE?????

I'm losing sympathy for this aspect of the argument.

There was a time when I wouldn't dream of pulling out my credit card for a small purchase, back when the electronic approval systems were relatively slow. But a while back, I'd forgotten to go the bank to get cash, and wound up having to charge my quick lunch. Ever since then, I've been hooked. Not only does it save me trips to the ATM (a nuisance, since I use small banks and don't want to pay fees just to use the most convenient ATM), but those small cash-back bonuses add up.

A business that's paying Staples one month with a credit card, one month with petty cash, and one month with a check is already creating their own bookkeeping headache. Aren't they going to want some way to know what they're spending on office supplies? Other than reimbursing staff who picked things up on the way to the office, it's so much easier to use a credit card for absolutely everything possible. That solves the bulk of the problem. The ones who won't take a credit card are precisely the ones for whom issuing the 1099 makes sense.

[Lion]

Knowing

I do know how much my clients spend on office supplies, and so do they. What I don't know is how much was not by a credit or debit card and, therefore, needs a 1099. So, even those with bookkeeping systems running smoothly will now have to retool to have different accounts for Staples - Credit and Staples - Noncredit and every other account, too. I haven't even looked at how to revise QB for that. Are you taking the time (unpaid?!) to get your clients set up now through the holidays or first thing in January, so 2011 will be able to break out 1099 reporting? My clients aren't understanding why they need to make changes. They certainly won't see why they should pay me more.

[luke]

2012

Are you taking the time (unpaid?!) to get your clients set up now through the holidays or first thing in January, so 2011 will be able to break out 1099 reporting? My clients aren't understanding why they need to make changes. They certainly won't see why they should pay me more.

Isnt 2012 the START date for these 1099 changes? (not 2011)?

[joanmcq]

I too use a credit card for nearly all my purchases, except for my CPE meetings and a large (for me) advertisement. Since I have an Office Depot rewards card, as well as a biz Discover card that gives me 5% cash back on office supplies, I see no reason to pay cash. I think the only time I have was to buy a $5 receipt book for my rentals. Who goes to an Office Depot and writes a check? C'mon folks, get real! Have you ever seen anyone write a check in a store in the last 5 years or so with the exception of an occasional senior in the grocery store? Anyone I pay by check, I always pay by check (ie the advertisement & ASWA meetings or my business license). And most, with the exception of the advertisement, are never over $600.

[Lion]

2012?

I've been postponing reviewing to December, but from memory if 2012 is the year to send Forms 1099, then 2011 is the year that is tracked. No?

At least one of my clients pays by CC if in the store or online, but pays by check when he receives an invoice in the mail -- both those methods for Staples and other vendors. Also, isn't the exception for credit cards only for AmEx/VISA/MC/Discover/PayPal and not for store charges? So, my clients that have a charge account at Fairfield Stationers will have to track when they charge on their VISA vs. when they use the store account?