ObamaCare: 1099 Disaster for Small Businesses and Nonprofits

It turns out that there is another “gremlin” born from ObamaCare.  This time, however, the weapon is a heavy load of bureaucracy that threatens to crush small businesses and nonprofits.

1099 forms have always been required of such organizations. In these forms, the businesses give the IRS an explanation of all independent contracts, on which more than $600 is spent per fiscal year.  Most small organizations send out only a few dozen each year, but all is about to change.

According to section 9006 of ObamaCare, these forms must be submitted for any goods or services purchased by an organization for more than $600 per year, not just for independent contractors.  That means that these entities will be required to send 1099 forms for things as mundane as tracking tax IDs for airline tickets, office supplies, and even catering.   For a small business, the volume of tax IDs could increase from a few dozen to over 3,000. Any mistakes, and the IRS charges serious fines.

For large businesses, there are generally enough resources to handle this increase in forms, but for a small business, the load could be overly burdensome and confusing.  It would be easy to let something small slip, then face a hefty fine.  But, the more likely scenario is that small businesses, or really any overwhelmed organization, will probably chose to lessen their bureaucratic load by dealing with fewer contractors or goods/service providers; which means the small independent contractors and goods/services providers will be the first to go.  This is another example of Washington refusing to consider unintended consequences.

Why the sudden changes, and what does any of this have to do with the Health Care bill to which the measure was attached?

Put simply, the increase in 1099 forms was meant to raise money to help pay for ObamaCare. But for all the burdens and potential havoc the measure will place upon businesses, how much money will it raise? A mere $2 billion, which in the context of the cost of ObamaCare, is next to nothing.

Thanks to the Leadership Institute for alerting us to this matter.

Tags: , , , , ,

This entry was posted on Tuesday, July 27th, 2010 at 2:48 pm and is filed under front page. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Responses to “ObamaCare: 1099 Disaster for Small Businesses and Nonprofits”

  • Prof B

    We need representatives in Congress who have experience running businesses (both small and large). These “faculty lounge”rs have big, euphoric dreams, but their implimentation is a disaster.

  • Linda

    Call me a conspiracy theorist but I don’t believe any of these laws were written with no consideration for the unintended consequences. Based on so many factors over the last two years, these consequences are intended to achieve their ultimate agenda, social justice, spreading the wealth, destroying capitalism, just to name a few.