By Christine Souza
California Farm Bureau Federation
A potentially burdensome new record keeping requirement facing farmers, ranchers and other small business owners has moved closer to repeal. The U.S. Senate passed legislation last week, H.R. 4, which would end the “1099 requirement” included in the federal health-reform package.
The bill now awaits President Obama’s action. In his State of the Union address, the president said he would seek repeal of the requirement.
H.R. 4, known as the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, would repeal a requirement that small business owners, farms and ranches file an Internal Revenue Service Form 1099 for all payments, including goods and services, totaling $600 or more in a calendar year for each vendor. The government planned to tax revenues reported on 1099 forms in order to raise money to fund health care reform. The Form 1099 provision was set to begin in 2012.
California Farm Bureau Federation President Paul Wenger called the measure’s passage a victory for farmers, ranchers and small businesses.
“We applaud the Senate for passing 1099 repeal. We also congratulate Rep. Dan Lungren, who was one of the prime movers of this bill in the House,” Wenger said. “Repealing 1099 is an important step in reducing unnecessary paperwork for farmers and ranchers.”
CFBF Director Janet Kister, who operates a nursery in San Diego County, said the 1099 rule would create an unnecessary and costly paperwork burden for businesses.
“Right now in our business we create about 20 1099s for people who do a service for us. Should this have gone through the way that they had proposed, that number would have increased to 500 or more,” Kister said. “The amount of time we would have had to spend on labor would be enormous, trying to make sure that we had the taxpayer identification number or the federal ID number of all of these companies, plus to verify that all of the information that we were putting down on the 1099s was correct, plus to actually do these 1099s, which we do by hand.”
Kister added that farmers and ranchers need to be focusing on their businesses, not doing extra work for the government for little reward.
“It seemed like those people who do the right thing anyway were going to be penalized by having to do this extraordinary amount of work, and yet the people that they are trying to capture wouldn’t be caught,” she said. “We never thought that they would be able to get as much money as they thought they would generate from these 1099s, and yet the amount of lost productivity for the businesses would have been tremendous. In this economic time, we cannot afford to be doing anything extra like this.”
Lungren, R-Gold River, said the “placement of this tax provision into the government-run health care law was ill advised” and that “the provision demonstrated that the bill’s authors did not consider the job creators of America and those who lay awake at night trying to figure out how to make payroll.”
In the Senate, Sen. Debbie Stabenow, D-Mich., offered an amendment to repeal the requirement early this year. Stabenow said with the requirement, 1099 filings for 40 million American businesses—the lion’s share of them small businesses—would increase an estimated 2000 percent.
“Repealing this burdensome requirement is a common-sense solution for business owners who need to be focused on creating jobs rather than filling out paperwork for the IRS,” Stabenow said. “I am pleased we were able to bring people in both parties together so President Obama can sign this legislation into law.”
American Farm Bureau Federation President Bob Stallman added that repealing the onerous Form 1099 requirement is great news for farm and ranch families.
“This was a costly, burdensome and unnecessary tax compliance requirement that was counterproductive to job creation and economic growth,” Stallman said. “Farmers, ranchers and small businesses are overloaded with paperwork, and we are pleased that our leaders in Washington took steps to provide relief. Farm Bureau commends the Senate for passing H.R. 4, and we urge President Obama to sign it.”
The Senate voted by an 87-to-12 margin to repeal the 1099 requirement. The House adopted the measure in March by a vote of 314 to 112.
(Christine Souza is an assistant editor of Ag Alert. She may be contacted at [email protected].)
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