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SBA Backs 1099 Repeal

In an open letter to small business owners yesterday (Nov. 22), the Small Business Administration (SBA) added its voice to the chorus calling for the repeal of “burdensome” 1099 reporting requirements on small business transactions, stating the SBA’s support for the recently introduced Small Business Paperwork Relief Act.

The filing requirements, passed as part of the Affordable Care Act this year, mandated that all businesses that pay another individual or business $600 or more for goods and services issue 1099 forms beginning in 2012. The requirement quickly met with backlash from small businesses and others who said the paperwork would place an onerous, costly burden on them.

“The unintended consequence of a potential paperwork burden resulting from this provision quickly came to light, and we immediately began working with the Administration to reduce the burden of these potential future reporting requirements,” Karen Mills, SBA administrator, wrote in her open letter.

The Paperwork Relief Act, introduced by Sen. Max Baucus (D-Mont.) earlier this month, would repeal this provision.

Mills said that the repeal of the reporting provision would not adversely affect the Affordable Care Act, which provides important health care benefits to millions of Americans.  That act also contains provisions benefitting small businesses, she said, noting that small businesses are already taking advantage of the new tax credits for providing health insurance to employees this year.

Even President Barack Obama, a strong supporter of the Affordable Care Act, recognized the potential damage that the act’s reporting provision could cause and said on Nov. 3, “…the 1099 provision in the health care bill appears to be too burdensome for small businesses. It just involves too much paperwork, too much filing. It’s probably counterproductive.”

"It's striking and quite welcome that the Obama SBA is supporting the repeal of this ugly and costly mandate that was included in ObamaCare,” Raymond J. Keating, chief economist of the Small

Business & Entrepreneurship Council, told BusinessNewsDaily. “One would think that repeal of the 1099 mandate should now receive unanimous support in Congress. Of course, it would be nice if we could get the SBA to now support full repeal of ObamaCare, given the big costs it will impose on small businesses and the economy."

Others in the small business community concur on the urgency of 1099 reporting repeal. On Nov. 18, Larry Nannis, chair of the National Small Business Association, testified before the U.S. Senate Committee on Small Business and Entrepreneurship on the need to reduce the tax-related regulatory burden on small business.

“This ugly by-product of the health care reform legislation would increase the number of 1099s filed by small business from an average of 10 to 86,” Nannis said. “Furthermore, it will inevitably stifle business-to-business transactions, giving big-box retailers an inherent advantage as businesses look to streamline, and thus ease the burden of this new reporting requirement.”

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.


Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.