Expanded Form 1099 Reporting "A Nightmare"

BY PATRICK A. HELLER, CPA

The article “The Coming 1099 Revolution: Are You and Your Clients Ready?” (Aug. 2010, page 40) provided much useful information on the tremendous increase in burdensome paperwork that will be imposed on American businesses by section 9006 of the Patient Protection and Affordable Care Act.

 

As the largest coin and precious metals dealership in Michigan, we serve more than 60,000 walk-in customers and tens of thousands of mail-order customers per year. The majority of walk-in customers sell merchandise to us, with a very high percentage selling us $600 or more over the course of a year. I estimate that my company will have to file 13,000 to 15,000 Forms 1099 annually above what we are already required to submit.

 

However, the workload is even more onerous than that. We don’t know if someone selling us $10 worth of jewelry or coins on Jan. 2 will return later and possibly receive at least $600 in payments by the end of the calendar year. Consequently, my company will be forced to obtain a W-9 form from everyone who sells us merchandise or provides a service, then keep track of all such purchases by seller.

 

Nationwide, this massive collection and dissemination of data is unlikely to increase tax collections by any significant degree. I estimate that about 45% of the 1099 forms we will be required to submit will be for merchandise sold to us at a loss. Moreover, this volume of confidential personal tax information also will create another problem: an almost certain increase in identity theft. I am concerned that some businesses in dire financial condition, to help cash flow, may simply sell such information to identity thieves. I’m sure that the legislators who drafted and voted this bill into law did not mean to create this consequence, which I believe may turn out to be its greatest nightmare.

 

Already, I have heard from a number of owners of small contracting companies, local restaurants, antique shops, and rare coin and precious metals dealers who are old enough to collect Social Security and who are planning to simply close or sell their businesses by the end of 2011 to avoid this paperwork burden. I’m not sure how the IRS is supposed to collect more tax revenue as businesses close and jobs are lost.

 

I thank the AICPA for advocating the repeal of section 9006 of the Patient Protection and Affordable Care Act.

 

Patrick A. Heller, CPA

CEO and owner, Liberty Coin Service,

Lansing, Mich.

 

SPONSORED REPORT

How the election may affect taxation of business income

This report summarizes recent proposals to reform the U.S. business income tax system and considers the path to enactment of any such legislation.

VIDEO

How to Excel pivot a general ledger

The general ledger is a vast historical data archive of your company's financial activities, including revenue, expenses, adjustments, and account balances. J. Carlton Collins, CPA, shows how to prepare data for, and mine data with, PivotTables.

QUIZ

Did you follow 2016’s biggest accounting news?

CPAs will remember 2016 as a year of new standards and new faces. How well did you follow the biggest accounting events? The 7 questions in this quiz will help you find out