Buried deep in the new healthcare law in section 9006, is a senate amendment that will modify section 6041 of the US Tax Code. The amendment modifies existing requirements for reporting of purchases made by small business and self-employed individuals above $600.00. Starting on January 1, 2012 those purchases will have to be reported to the federal government on a form 1099.
“The following types of payment must be reported: Medical and healthcare payments, fish purchases for cash, attorneys fees, gross proceeds paid to an attorney, substitute payments in lieu of dividends or tax exempt interest, and payments by a Federal executive agency for services.”
“under the provision, a business is required to file an information return for all payments aggregating $600.00 or more in a calemdar year to a single oayeee(other than a payee that is a tax-exempt corporation), notwithstanding and regulation promulgated under section 6041 prior to the date of enactment. The payments to be reported include the gross proceeds paid in consideration for a property or services. However, the provision does not override specific provisions elsewhere in the Code that except certain payments from reporting, such as securities or broker transactions as defined under section 6045(a) and the regulations thereunder.”
The penalty is $50.00 for each return for which such failure occurs. The total penalty imposed on a person for all failures cannot exceed $250,000 during a calendar year. The penalty for an incorrect reporting is $50.00, with the total penalty not to exceed $100,000 during a calendar year.
ABC News is reporting that this new regulation will also affect the sale of gold between buyers and sellers. Every time a Buyers sells more than $600.00 worth of gold to a dealer, that transaction will have to be reported to the federal government in the form of a 1099. Since gold is selling at more than $1,200 an ounce, the increase in reporting is predicted to explode exponentially, raising the accounting costs for small businesses. The reason for this change may be the Government feels there is taxable income that is escaping their grasp and is hoping to squeeze another 17 billion dollars out of the American economy to help pay for President Obama’s gargantuan healthcare law.
The overall consequences of this new regulation is both enormous and onerous to any small business or self-employed individual who buys goods and services without charging it to a credit card. Over the past two years with the advent of the financial crisis and Senator Dodd’s credit card legislation, many small businesses and self-employed individuals had their lines of credit and charge cards either severely cut or closed. Now these same struggling businesses will be saddled with extra federal reporting costs and fines if they fail to do so properly or make a mistake. This provision puts yet another nail in the coffin of American small business and entrepreneurs. Obama strikes gold. Americans strike out.