NFIB Leads Successful Grassroots Effort to Repeal 1099 Reporting Requirements

Date: August 23, 2016

NFIB-led effort concludes as President Obama signs off on full 1099 repeal  

In a win for small businesses, the president has signed off on a bill to repeal the onerous IRS Form 1099 reporting requirement. The Senate passed H.R. 4, a bill to fully repeal the requirement, on April 5. The same bill was passed in the House earlier in March. NFIB led the repeal effort on behalf of over 350,000 member businesses.
“Small businesses have been struggling to come up with a way to account for this burdensome tax reporting mandate, and it has been the top priority of NFIB to see it repealed,” said Susan Eckerly, Senior Vice President of Federal Public Policy at NFIB. “NFIB and its members are glad to finally see this ill-conceived rule removed from the books by Congress.”
Senators Mike Johanns (R-NE) and Joe Manchin (D-WV) introduced the repeal bill in the Senate. It mirrored legislation which passed in the House of Representatives on March 3 to repeal the 1099 tax reporting rule, H.R. 4.
“NFIB thanks Senator Johanns for bringing this repeal to the Senate floor for a vote,” added Eckerly. “No other rule or regulation has been as widely unpopular as the 1099 mandate, and it was past time to see it go.”
The 1099 tax reporting rule was included in the passage of the Patient Protection and Affordable Care Act last year. It was criticized by lawmakers from both parties in both chambers of Congress and the White House as being an over-burdensome paperwork mandate placed on small businesses.
It would have required small businesses to file Form 1099 for every business-to-business transaction totaling over $600. The requirement, intended to capture lost tax revenue, would have placed the burdensome requirement on small businesses of not only reporting on their own income, but also the income of their vendors.

Why is the 1099 reporting requirement bad for small business?

·         On average, small businesses spend more than $74 per hour on their tax compliance obligations, which make it the most expensive paperwork burden that the federal government imposes on small business owners.
·         Small businesses typically lack an in-house finance department to track this type of reporting, which means owners could be faced with hiring outside help to ensure their businesses comply with the new law.
·         Complying with the tax code is already 66 percent more expensive for small businesses than large businesses.
·         1099 reporting will cost more in compliance than it will generate in revenue and could subject small businesses to more audits from the IRS.
·         While this reporting requirement seeks to capture non-compliant corporations, it actually places the burden on compliant small businesses.

Previous Legislative Activity

House action:
·         On March 3, 2011, H.R. 4 passed 314-112; it was an NFIB key vote.
·         NFIB worked hard to secure the support of 76 Democrats and 83 freshman congressmen. The bill had unanimous Republican support.
·         The testimony of NFIB member Jerol Kivett before the House Small Business Committee in late February highlighted the negative impact the 1099 reporting requirement would have on a small, family-owned business.
·         NFIB key-voted in support of 2010 legislation (H.R. 5982) that fully repealed 1099, but it did not pass the House.
Senate action:
·         On Feb. 2, 2011, NFIB key-voted in support of the Stabenow amendment; it passed 81-17. This amendment also fully repeals the 1099 tax reporting requirement.
·         NFIB key-voted in support of previous legislation (the Johanns amendment) that fully repealed 1099, but it did not pass the Senate.
·         NFIB also key-voted against legislation—the Nelson (Fla.) amendment—that did not fully repeal 1099, and it did not pass the Senate.


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