Under the Patient Protection and Affordable Care Act that was signed into law last year, businesses will have to file a significant number of additional IRS Form 1099s. Currently, businesses are required to file 1099s when they purchase more than $600 in services in a given tax year. But starting in 2012, businesses would also need to file 1099s for purchases of goods from a vendor that exceed $600. In addition, whereas transactions with corporations have generally been exempted, this will no longer be the case under the new law. NAHB has vigorously argued against these expanded reporting requirements, and for the most part, lawmakers have agreed on the need to repeal them. In fact, the Senate recently approved an amendment to the FAA reauthorization bill that would do just that, assuming the House approves a similar measure.
With the House likely to take up repeal legislation in the coming weeks, home builder Mike Kegley from Union, Ky., testified before the House Small Business Committee on Feb. 9 about the effect that the new reporting requirements could have on his business. His company, which built six homes last year and employs seven workers, estimates that it would have had to file an additional 173 forms for 2010 had the law been in effect at that time. Mike told committee members that it would have cost his company $6,400 to obtain and catalog the W-9 forms and $2,600 to generate the additional Form 1099s, for an estimated total of $9,000 â€” and that does not include the software upgrades he would have had to purchase or subsequent work that would have to be done to correct any errors. In all, he told lawmakers, these burdensome tax paperwork requirements would make it more difficult for small businesses to add new employees to their payrolls, because they’ll instead be spending that money on accountants and bookkeepers. Additionally, Mike called lawmakers’ attention to the unfairness of a provision in the Small Business Jobs Act of 2010 stipulating that independent landlords as of Jan. 1, 2011 must submit 1099s to firms to which they give more than $600 for services. “By imposing this change in the law with less than three months notice, we believe it is reasonable to say that landlords have been set up for failure when it comes to compliance,” he said. “NAHB urges Congress to re-examine the wisdom of imposing these burdensome requirements on independent landlords and, ultimately, to repeal them.”