IRA to IRS: New 1099 Reporting Requirements Should be Repealed
WASHINGTON, Sept. 29, 2010—The International Franchise Association today called for the repeal of expanded reporting requirements for small businesses enacted as part of the health care reform bill in comments submitted to the Internal Revenue Service.
“The immense scope of this new information reporting requirement will undoubtedly impact the operations of small franchised businesses and lead to serious unintended consequences,” said IFA Senior Vice President of Government Relations & Public Policy David French. “The proposed rules are very broad and afford no opportunity to minimize the burden of these requirements. Therefore, the IFA strongly believes that the only solution for franchise business owners is to repeal these new reporting requirements before they are scheduled to go into effect.”
Under the new health care law, The Patient Protection and Affordable Care Act, beginning in 2012, businesses must report all transactions that involve property and services, and which aggregate more than $600 in a year. These transactions will trigger the requirement to file a Form 1099 with the IRS and furnish taxpayer identification numbers (TINs) for the businesses and persons involved. Currently, businesses are only required to file Form 1099 for independent contractors they use in their businesses. The new rules expand the requirements to cover all goods and services purchased for the business.
letter to Keith Brau in the IRS Office
of Associate Chief Counsel for Procedure & Administration, French identified several examples of how the new rules would impact franchise businesses, including in one example a three-fold increase in the number of forms that a franchise business would be required to file, doubling the number of vendors that would be involved.
“Based on these new requirements, small business owners will be forced to spend more time collecting the information needed to properly report their business-to-business transactions,” French said. “In addition to the time and money spent on these new forms and tracking payment information, our members are also concerned that this new requirement will change their tax filings and prompt additional questions from the IRS.”
French said that with the amount of new information the IRS will receive, small businesses are likely to face a heightened level of scrutiny from IRS examiners. “Most troubling is that these inquiries are likely to fall on already compliant small business taxpayers, forcing them to defend their tax filings against IRS inquiries,” he said. “The increased burden to carefully track all payments to each and every new and existing vendor and the influx of paperwork filing will inevitably result in mistakes and trigger audits.”
About the International Franchise Association
The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating 50 years of excellence, education and advocacy, IFA protects, enhances and promotes franchising through government relations, public relations and educational programs. Through its awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the 21 million jobs and $2.3 trillion of economic activity generated by franchising. IFA members include franchise companies in over 90 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.