IRS has no answer on the new controversial 1099 rule

IRS has no answer on the new controversial 1099 rule

Despite repeated requests from the ranking minority member of the House Small Business Committee, Sam Graves (R-Mo.), the IRS continues to decline providing guidance on how it intends to implement the new 1099 reporting rule that requires every business to file a 1099 to the IRS for every purchase above $600, which raises questions about compliance and law enforcement.

The measure, which was enacted as part of Healthcare Reform, was designed to capture billions of tax dollars of unreported income. Just the same, organizations representing small businesses, including NADA, argue the measure is over burdensome for their members.

Requiring every small business to report any purchase greater than $600 will be a tremendous burden since most do not have a computerized accounting system or systems that can produce payments by vendors easily, NADA told the IRS in written comments.

It is anticipated that the new rule would require businesses to track payments by the receiver’s employer ID number (EIN) to ensure proper matching of payments to the correct business entity. “Entrepreneurs are unable to plan for the future, expand their operations or hire new employees for fear that this mandate could force them to dramatically change the way they do business,” said Rep. Graves in a letter to the IRS . “I respectfully reiterate my request that the IRS provide our small business owners with some much needed clarity on the scope of this rule.”

Graves had asked on two occasions for the IRS to provide him implementation guidance on the rule, first back in June and again at the beginning of October. Compliance with the new 1099 rule, however, should be a matter between the business and its tax advisor, notwithstanding any rightful concerns of Congressman Graves.