The tax man cometh...

05-13-2010, 12:38 PM

This was taken from my latest blog post. I know many of us on here are business owners and this is something every business owner should be aware of:

Small business owners and entrepreneurs beware, the tax man cometh. This past week, a new easter egg tax reform was found hidden within the Health Care bill our wonderful lawmakers just passed.

Meet Section 9006 of the health care bill.

It’s quick reading. At about one page long it’s easy to see how it went unnoticed within the 2,409 page bill, eluding debate or discussion. If you read it a few times, as I have, it sounds so innocuous. But like a car salesman glossing over the fine print of a very one-sided sale, someone is about to get screwed.

1099’s have always served one purpose: to document income for individual workers that was not considered wages or salaries. Each business would issue them at the end of the year to any independent contractors that had done more than $600 dollars of work for them. Now, however, the 1099 form is about to take on a whole new meaning. Any goods and services purchased from a business in excess of $600 will now have to be 1099’d.

Did you buy an Dell computer this year? If so, you will now have to get a W-2 form from Dell and send them and the IRS a 1099 at the end of the year. The same for virtually EVERY company you do business with. Your vendors, your landlord, the restaurant around the corner you treat your employees to every friday. If you spent more than 600 dollars with them within the year, each of them will have to be 1099’d.

With the health care bill handing the job of enforcement to the IRS, there was already cause for alarm. The healthcare bill has now handed the IRS a task so large it will need to hire on hundreds if not thousands of new positions. With this new tax regulation, it will likely take twice as long for a small business to file their taxes each year. This costs more money, thus hurting a small business’s ability to employ. This will achieve exactly the same effect as a tax increase.

The reason for this sneaky new law is to give the Federal Government a better idea of where businesses are spending their money. They’re hoping it will help them catch more unreported income and in-turn raise tax revenue. But that’s probably a very rosy assessment of how the information will be used. Tens of millions, if not billions of new 1099’s will need to be issued each year, giving the Fed a very clear picture of every business’s balance sheet.

Every year our government spends roughly $1.5 trillion dollars more than its revenues bring in. I believe strongly that the knowledge gleaned from this 1099 perversion will be put to good use in auditing algorithms and future tax decisions against small businesses. As anyone who has ever been audited will tell you, the tax man always gets the last word.

captain53 · 05-13-2010, 01:12 PM

Holy Jeez!

pnoon · 05-13-2010, 01:15 PM

fyi - if the thread turns political, it will disappear.

RevSmoke · 05-13-2010, 01:15 PM

This is scary stuff, for those who own small businesses. It could get very expensive, very quickly.

acarr · 05-13-2010, 01:38 PM

I may be a minority here but I agree with it. It will put small business owners on par with the poor working folk of America (W-2 Employees) who have no way to massage their numbers like small business owners do. As for the additional work, it is a push of a button to generate the rest of the 1099's. That is unless the business does not keep good records and if they can't keep good records, they should not be in business.

markem · 05-13-2010, 02:12 PM

This is at the end of the article. I tend to agree with the sentiments expressed. I will note that I will be subject to the additional requirements, but they aren't that much, at least for me.

"The buzz on the internet is that this will create mounds of unnecessary paperwork for small businesses across the country. It is true that the number of 1099s will increase significantly, however, I see two positive implications of these changes. First, it will force business owners to keep better records, report income more accurately, and pay the proper amount of taxes. Second, will also cut back on fraudulent business deductions, which will ease the burden on the IRS to catch tax cheats and, hopefully, save the rest of us honest taxpayers the hassles associated with overbearing IRS scrutiny. The work involved in issuing 1099s to your vendors and processing the 1099s you receive will not be overbearing. Think of it as high school math class – you don’t get an A without showing your work."

croatan · 05-13-2010, 02:19 PM

Quote:

Originally Posted by markem

Think of it as high school math class – you don’t get an A without showing your work."

I didn't like "showing my work" in 7th grade and I still don't like it today. The answer is the answer and if someone doesn't like it, he can go **** himself. By the way, I have nothing of substance to add to this thread--I just wanted to rant about 7th grade math.

pnoon · 05-13-2010, 02:24 PM

Quote:

Originally Posted by croatan

I didn't like "showing my work" in 7th grade and I still don't like it today. The answer is the answer and if someone doesn't like it, he can go **** himself. By the way, I have nothing of substance to add to this thread--I just wanted to rant about 7th grade math.

spoken like an eighth grader.

markem · 05-13-2010, 02:25 PM

Quote:

Originally Posted by croatan

I didn't like "showing my work" in 7th grade and I still don't like it today. The answer is the answer and if someone doesn't like it, he can go **** himself. By the way, I have nothing of substance to add to this thread--I just wanted to rant about 7th grade math.

yeah, but now you insist on showing your work because billable hours are billable hours, right?

J0eybb · 05-13-2010, 02:27 PM

I'd like to know what this has to do with health care. Maybe this is how it is supposed to get it's funding?

croatan · 05-13-2010, 02:32 PM

Quote:

Originally Posted by markem

yeah, but now you insist on showing your work because billable hours are billable hours, right?

Mark, it saddens me that you would entertain the thought that someone in my profession would stoop to such behavior

markem · 05-13-2010, 08:00 PM

Quote:

Originally Posted by croatan

Mark, it saddens me that you would entertain the thought that someone in my profession would stoop to such behavior

Spent many hours today in the company of "those like you" and plan to spend a lot of time in the next week helping them accomplish their "evil plans".

TMSAISTI

Eleven · 05-13-2010, 09:28 PM

Ridiculous.

How can it not be overbearing when Dell will be receiving about 65,000 1099's on the same day?

What about the ONE gas station that serves thousands and thousands of truckers on a regular basis? They won't be overwhelmed when 10's of thousand of 1099's come in at once?

Its hard not to go political on this since its the government doing it. This is just wrong.

stitch · 05-14-2010, 12:23 AM

Quote:

Originally Posted by acarr

I may be a minority here but I agree with it. It will put small business owners on par with the poor working folk of America (W-2 Employees) who have no way to massage their numbers like small business owners do. As for the additional work, it is a push of a button to generate the rest of the 1099's. That is unless the business does not keep good records and if they can't keep good records, they should not be in business.

As a small business owner I gotta ask ....
Your kidding right. ??

05-14-2010, 01:45 PM

Quote:

Originally Posted by markem

This is at the end of the article. I tend to agree with the sentiments expressed. I will note that I will be subject to the additional requirements, but they aren't that much, at least for me.

"The buzz on the internet is that this will create mounds of unnecessary paperwork for small businesses across the country. It is true that the number of 1099s will increase significantly, however, I see two positive implications of these changes. First, it will force business owners to keep better records, report income more accurately, and pay the proper amount of taxes. Second, will also cut back on fraudulent business deductions, which will ease the burden on the IRS to catch tax cheats and, hopefully, save the rest of us honest taxpayers the hassles associated with overbearing IRS scrutiny. The work involved in issuing 1099s to your vendors and processing the 1099s you receive will not be overbearing. Think of it as high school math class – you don’t get an A without showing your work."

I disagree with that assessment. It is not the extra work that worries me inasmuch as the new information the IRS will be gleaning. As a business owner, I don't need to be worrying about what the IRS will think of my purchases this year. Or how that information might be used against me some day by an IRS auditor.

We are giving them more power, in an area where they haven't proven a single good reason why they need it. And that power is often impossible to repeal. Shame on the lawmakers who put this in without at least giving it a proper debate.

05-14-2010, 02:01 PM

Vote to repeal. One issue.
Nobody was fooled or deceived. This is only the beginning.
What do you suppose they will do to people who don't comply?

macpappy · 05-15-2010, 08:33 AM

I wonder if this will apply to sole proprietor LLC's as well? Probably. I guess that means I'll have to change the way I do things and instead of paying for daily items out of my LLC account, just transfer the money into my household account and pay things through it.

cbsmokin · 05-15-2010, 09:20 AM

Quote:

Originally Posted by macpappy

I wonder if this will apply to sole proprietor LLC's as well? Probably. I guess that means I'll have to change the way I do things and instead of paying for daily items out of my LLC account, just transfer the money into my household account and pay things through it.

Legitimate business expenses reduce your taxable income. Doing this would make you pay tax on those legitimate expenses.

BigFrank · 05-15-2010, 09:58 AM

impeach congress.

qwerty1500 · 05-15-2010, 10:15 AM

It seems that our auditors were not aware of the new 1099 requirements when we asked a couple of weeks ago. However, we already expect that the new 990 information return requirements for certain non-profits will complicate our accounting procedures and double our tax preparation and audit costs. Now this ... I guess we will see those costs double again?

It appears that accounting, auditing and tax compliance are quickly becoming real growth industries.

05-13-2010, 12:38 PM	#1
covetry Guest Posts: n/a	The tax man cometh... This was taken from my latest blog post. I know many of us on here are business owners and this is something every business owner should be aware of: Small business owners and entrepreneurs beware, the tax man cometh. This past week, a new easter egg tax reform was found hidden within the Health Care bill our wonderful lawmakers just passed. Meet Section 9006 of the health care bill. It’s quick reading. At about one page long it’s easy to see how it went unnoticed within the 2,409 page bill, eluding debate or discussion. If you read it a few times, as I have, it sounds so innocuous. But like a car salesman glossing over the fine print of a very one-sided sale, someone is about to get screwed. 1099’s have always served one purpose: to document income for individual workers that was not considered wages or salaries. Each business would issue them at the end of the year to any independent contractors that had done more than $600 dollars of work for them. Now, however, the 1099 form is about to take on a whole new meaning. Any goods and services purchased from a business in excess of $600 will now have to be 1099’d. Did you buy an Dell computer this year? If so, you will now have to get a W-2 form from Dell and send them and the IRS a 1099 at the end of the year. The same for virtually EVERY company you do business with. Your vendors, your landlord, the restaurant around the corner you treat your employees to every friday. If you spent more than 600 dollars with them within the year, each of them will have to be 1099’d. With the health care bill handing the job of enforcement to the IRS, there was already cause for alarm. The healthcare bill has now handed the IRS a task so large it will need to hire on hundreds if not thousands of new positions. With this new tax regulation, it will likely take twice as long for a small business to file their taxes each year. This costs more money, thus hurting a small business’s ability to employ. This will achieve exactly the same effect as a tax increase. The reason for this sneaky new law is to give the Federal Government a better idea of where businesses are spending their money. They’re hoping it will help them catch more unreported income and in-turn raise tax revenue. But that’s probably a very rosy assessment of how the information will be used. Tens of millions, if not billions of new 1099’s will need to be issued each year, giving the Fed a very clear picture of every business’s balance sheet. Every year our government spends roughly $1.5 trillion dollars more than its revenues bring in. I believe strongly that the knowledge gleaned from this 1099 perversion will be put to good use in auditing algorithms and future tax decisions against small businesses. As anyone who has ever been audited will tell you, the tax man always gets the last word.

05-13-2010, 01:12 PM	#2
captain53 Have My Own Room Join Date: Jul 2009 First Name: Dave Location: Lake of the Ozarks & Austin, TX Posts: 1,333 Trading: (3)	Re: The tax man cometh... Holy Jeez!

05-13-2010, 01:15 PM	#3
pnoon YNWA Join Date: Oct 2008 First Name: Peter Location: San Diego Posts: 29,919 Trading: (20)	Re: The tax man cometh... fyi - if the thread turns political, it will disappear. __________________ Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are. -John Wooden

05-13-2010, 01:15 PM	#4
RevSmoke Ain't Never Gonna Leave Join Date: Oct 2008 First Name: Todd Location: Northcentral woods of Wisconsin Posts: 6,865 Trading: (51)	Re: The tax man cometh... This is scary stuff, for those who own small businesses. It could get very expensive, very quickly. __________________ Todd__ "Smoke what you like, and enjoy it!"

05-13-2010, 01:38 PM	#5
acarr Have My Own Room Join Date: Oct 2008 Posts: 1,307 Trading: (34)	Re: The tax man cometh... I may be a minority here but I agree with it. It will put small business owners on par with the poor working folk of America (W-2 Employees) who have no way to massage their numbers like small business owners do. As for the additional work, it is a push of a button to generate the rest of the 1099's. That is unless the business does not keep good records and if they can't keep good records, they should not be in business.

05-13-2010, 02:12 PM	#6
markem Bunion Join Date: Oct 2008 First Name: Mark Location: Second Star on the Right Posts: 22,626 Trading: (47)	Re: The tax man cometh... This is at the end of the article. I tend to agree with the sentiments expressed. I will note that I will be subject to the additional requirements, but they aren't that much, at least for me. "The buzz on the internet is that this will create mounds of unnecessary paperwork for small businesses across the country. It is true that the number of 1099s will increase significantly, however, I see two positive implications of these changes. First, it will force business owners to keep better records, report income more accurately, and pay the proper amount of taxes. Second, will also cut back on fraudulent business deductions, which will ease the burden on the IRS to catch tax cheats and, hopefully, save the rest of us honest taxpayers the hassles associated with overbearing IRS scrutiny. The work involved in issuing 1099s to your vendors and processing the 1099s you receive will not be overbearing. Think of it as high school math class – you don’t get an A without showing your work." __________________ I refuse to belong to any organization that would have me as a member. ~ Groucho Marx

05-13-2010, 02:27 PM	#10
J0eybb Feeling up at Home Join Date: Feb 2010 First Name: Joe Location: Las Vegas Posts: 1,084 Trading: (5)	Re: The tax man cometh... I'd like to know what this has to do with health care. Maybe this is how it is supposed to get it's funding? __________________ Live Chat http://www.cigarasylum.com/vb/showthread.php?t=60202

05-13-2010, 09:28 PM	#13
Eleven Solid As The Sun Join Date: Aug 2009 First Name: Scott Location: SW Ohio Posts: 1,859 Trading: (23)	Re: The tax man cometh... Ridiculous. How can it not be overbearing when Dell will be receiving about 65,000 1099's on the same day? What about the ONE gas station that serves thousands and thousands of truckers on a regular basis? They won't be overwhelmed when 10's of thousand of 1099's come in at once? Its hard not to go political on this since its the government doing it. This is just wrong. __________________ CA: putting the 'man' in bromance since 2008! --markem.

05-14-2010, 02:01 PM	#16
BC-Axeman Guest Posts: n/a	Re: The tax man cometh... Vote to repeal. One issue. Nobody was fooled or deceived. This is only the beginning. What do you suppose they will do to people who don't comply?

05-15-2010, 08:33 AM	#17
macpappy Rider on the storm. Join Date: Oct 2008 Location: Slidell, LA Posts: 851 Trading: (0)	Re: The tax man cometh... I wonder if this will apply to sole proprietor LLC's as well? Probably. I guess that means I'll have to change the way I do things and instead of paying for daily items out of my LLC account, just transfer the money into my household account and pay things through it. __________________ WARNING: I am a Southern White Male. I have a brain and I know how to use it.

05-15-2010, 09:58 AM	#19
BigFrank 5 3 1 Join Date: Nov 2008 First Name: Frank Location: Gym or Sofa. Posts: 1,896 Trading: (25)	Re: The tax man cometh... impeach congress. __________________ " Hope is the first step on the road to disappointment. "

05-15-2010, 10:15 AM	#20
qwerty1500 Good thing I'm normal Join Date: Oct 2008 Location: One Particular Harbor Posts: 607 Trading: (0)	Re: The tax man cometh... It seems that our auditors were not aware of the new 1099 requirements when we asked a couple of weeks ago. However, we already expect that the new 990 information return requirements for certain non-profits will complicate our accounting procedures and double our tax preparation and audit costs. Now this ... I guess we will see those costs double again? It appears that accounting, auditing and tax compliance are quickly becoming real growth industries.