Monday, March 7, 2011

Form 1099 Repeal has support, but lawmakers disagree on payment method

It would appear that lawmakers in Washington are in agreement on the repeal of new Form 1099 reporting requirements, but can't agree on how to accomplish that. On March 3, the House passed the "Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011" (H.R. 4), which is designed to repeal the expansion of information reporting requirements contained in the section of the ACA that required businesses to file Form 1099 for payments of expenses of $600 or more.

Rep. Daniel Lungren (R-CA), who introduced the bill, has stated that it would "finally provide assurance to small business owners that they will not be subject to this unfair and unnecessary tax reporting burden." The repeal of the expanded reporting requirements has received wide bipartisan support, but many lawmakers are less than pleased with this particular bill, and it is possible that it won't pass the Senate.

According to House Ways and Means Ranking Committee Chairman Sander Levin (D-MI), "the issue is not repeal of this provision of 1099. We on this side not only favor repeal but all of us who were here last session voted for it. We voted to repeal it. It failed because only two people on the then-minority side voted for the bill," adding that the "effort to repeal was blocked on the Republican side last session."

Levin said middle income families would see a tax increase if the bill were passed, explaining that, "It increases how much they will have to pay to the IRS if their income increases over what was projected when they would have obtained health insurance."

The Obama Administration added its two cents in a White House Statement of Administration Policy, stating that, "The Administration strongly opposes the House’s offset to pay for this repeal in H.R. 4," and, "Specifically, H.R. 4 would result in tax increases on certain middle-class families that incur unexpected tax liabilities, in many cases totaling thousands of dollars, notwithstanding that they followed the rules."

On the other hand, the Administration concedes that "the burden created on businesses by the new information reporting requirement . . . as included in Section 6041 of the Internal Revenue Code as modified by Section 9006 of the Affordable Care Act, is too great."

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.


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