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Bill would repeal new tax requirement for small businesses

Proposal by Rep. Dan Lungren (R-Gold River) would eliminate a provision not yet in effect that requires firms to report payments of $600 or more made to any vendors, not just freelancers. Small companies say the rule will be burdensome.

January 07, 2011|By Sharon Bernstein, Los Angeles Times

A congressional bill aimed at eliminating a tax rule that many small businesses complained was unfair to them has been introduced by Rep. Dan Lungren (R-Gold River).

The provision, set to go into effect in 2012, requires all businesses to file special forms with the Internal Revenue Service to report payments made not only to freelance workers, as in the past, but also to stores, vendors and anybody else from whom they bought $600 or more in goods or services over the course of a year.

The new provision was intended to help collect taxes from businesses and individuals who failed to report all of their income.

The Treasury Department said the measure would eliminate a $17-billion gap between what small businesses really owe and what they pay. The IRS has said it would work with businesses and hold hearings to make sure the law was not implemented in an onerous way.

Small-business owners and many accountants, however, say that expanding the Form 1099 requirements would generate huge accounting bills and so much paperwork that both businesses and the IRS would be overwhelmed.

Lungren — along with 185 cosponsors — agreed the measure should be repealed. "The backbone of our economy is small business," he said.

"Burdening them with expensive requirements and paperwork roadblocks will only further hinder their ability to contribute to our nation's economic recovery," the congressman said.

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