As our country works hard to pull itself out of a recession, Washington should be focused on policies that support economic growth and job creation. Yet at this crucial moment, small businesses are growing increasingly agitated over a tax filing requirement in the new health care law that will actually inhibit job growth and bury businesses in a new mound of paperwork. You read that right: a health care provision -- completely unrelated to health care -- that will stifle job creation. Last week I took action to repeal this burdensome provision, and to protect job creators from yet another Washington anti-job mandate.
All businesses currently file a handful of 1099 tax forms to report to the Internal Revenue Service (IRS) certain services they use for their business. A typical small business files about ten of these forms each year, according to one study. The new provision, set to go into effect in 2012, would significantly increase this requirement by forcing a business to file a 1099 form each time their purchases from a vendor -- any vendor -- total $600 for the year. Business costs add up quickly, and they'll have to file forms for the paper, fertilizer, and other supplies they buy throughout the year. If they host a pizza party for their staff once a month, the IRS may need to know about it if the costs exceed $600 or more for the year. One analysis projects this paperwork mandate will increase 1099 filing requirements for businesses by nearly 2,000 percent.
This might make some sense if it were to improve our tax filing system. Unfortunately, it will do just the opposite, according to the National Taxpayer Advocate Service, a division of the IRS. It reports the IRS "will face challenges making productive use of this new volume of information ... It is highly likely that the IRS will improperly assess penalties that it must abate later, after great expenditure of taxpayer and IRS time and effort." It will hit our businesses even harder. One small business owner from Nebraska conducted a cost analysis for his business and expects this to add $23,000 annually. Not a lot of money to some in the federal government, but to Nebraska business owners, it's a disincentive to hire workers and expand their business.
Quite simply, this provision should not be allowed to go into effect. I've introduced legislation in the Senate that would repeal it, and it has quickly gained support among my colleagues. I hope there will be a vote on it before Congress adjourns in August. This is not a partisan issue; it's about supporting our small businesses. The Administration and Congress have been imploring business owners to hire workers to help boost the economy, but simultaneously passing laws that leave our businesses reeling. It's time to set aside partisan differences and do what's right.