Obama Signs 1099 Repeal Into Law
Vol. 808
April 19, 2011
As expected, President Obama has signed legislation that repeals expanded 1099 tax
rules, eliminating a reporting provision often criticized as burdensome on
small businesses. In order to help recoup the projected $22 billion the
provision was expected to generate, the new law changes calculations related to
health-care credits, effectively requiring more people to repay the government
based on their annual income.
"I was pleased to take
another step to relieve unnecessary burdens on small businesses," Obama said in a statement. "I look forward to
continuing to work with Congress to improve the tax credit policy in this
legislation and I am eager to work with anyone with ideas about how we can make
health care better or more affordable."
The repeal of the
tax-reporting requirement, which was passed last year as part of national
health-care reform, is considered a victory for businesses, charities and
nearly 40 million self-employed workers. Under the expanded 1099 rules, these
groups would have been forced to file tax forms for every vendor they paid more
than $600 to in a given year. The goal of the rules was to stop tax fraud, but
the provision became unpopular when it was realized how many extra forms would
need to be filed with the Internal Revenue Service. The new law returns filing
requirements to their previous state, in which businesses must only report
payments to unincorporated entities for services.
Beginning last summer,
Congressional leaders from both major parties tried several times to repeal the
provision, but no one measure could gain enough support to pass. In his State
of the Union speech in January, Obama endorsed
changes to the 1099 provision, hoping tax credits would not be altered in any
new legislation. After about nine months of debate and defeated measures, the
U.S. House approved a repeal bill by a 314-112 margin on March 3 that was later
overwhelmingly passed by the U.S. Senate on April 5. Obama
signed the legislation last week despite his objections to the repayment
requirements.
While the guidelines are
voluntary, companies will likely face heavy pressure to adopt them.
"There's clearly a demand hidden behind the velvet glove of the voluntary
language," said Dan Jaffe, an executive vice president of the Association
of National Advertisers. Some leading food companies have criticized the
proposal, saying the industry has already taken major steps to make recipes
healthier and to advertise responsibly to children. "The rate of
reformulation is going to increase, not as a result of the principles that were
announced today but because consumers are demanding changes in the
marketplace," said Scott Faber, a vice president of the Grocery
Manufacturers Association, a group that represents food makers. |