Welfare Benefit Plan ERISA News & Views
July 2010

 
Massive Tax Change Hidden in PPACA
Brace youself for a coming flood of new government paperwork and taxes for businesses. On page 737 of the massive 2,409 page healthcare bill, PPACA, are three paragraphs that have nothing to do with doctors, drugs, or hospitals. In an effort to improve enforcement of tax laws and generate more revenue, every business that spends more than $600 for goods and/or services in a tax year with any vendor will be required to issue it an IRS Form 1099.
 
Currently, Form 1099 is only used to document income for services rendered by individual workers who are independent contractors. Beginning January 1, 2012, the new law will require the tracking of payments for goods in addition to services and to corporations as well as individuals.  
 
A business that spends more than $600 for a computer from Dell, or a restaurant that buys more than $600 of lettuce from a grower at the local farmers' market, will have to get the name, address, and tax ID number from Dell and the farmer and send them a Form 1099.
 
Gathering names and taxpayer identification numbers for every payee and vendor will be a "costly, anti-business nightmare," said Rep. Dan Lungren of California. The National Small Business Association projects that a typical employer will have to file 95 Form 1099s. In addition to the time, effort, and cost of preparing the Form 1099s, there is the cost of postage. Assuming that the 5.5 Million U.S. employers send a Form 1099 to 100 vendors at $0.44 each, that is $242,000,000 in postage alone!
 
Does this story relate to ERISA? Not directly, but it does underscore the government's efforts to capture information that will help it enforce laws and raise revenues - as exemplified by the new requirement that employers file Form 5500 electronically.
 

Sources:
CNNMoney.com and Bloomberg Businessweek
 

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