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Repeal of 1099 Reporting for Small Business -- What's the Holdup?

By Carol Tice Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Health-care reform came with a tacked-on provision for small businesses that's a massive paperwork headache. All small-business owners will be required to file 1099 forms for every vendor of products and services they pay more than $600 in a year. The provision kicks in at the beginning of 2012.

Everybody and their mother seems to want this provision repealed -- even the Small Business Administration recently endorsed repeal. But two different amendments to repeal the rule failed in September, a defeat the National Federation of Independent Business called a missed opportunity.

Here are two reasons why 1099 repeal is still in a holding pattern:

Partisan bickering. There were two versions of the 1099 repeal bill, because Democrats and Republicans each felt the need to put forward their own version. Then, both bills failed, with votes along party lines. This was followed by verbal potshots exchanged across the aisle about who had the better idea of how to replace the revenue that would be lost without the 1099 rule. Which brings us to:

The need for a revenue offset. The reason the provision passed in the first place is the Internal Revenue Service is hoping the new rule will turn up lots of previously undeclared income it can tax. The U.S. Treasury needs that revenue in this time of deficit spending. Lawmakers haven't been able to agree on another way to raise the money the 1099 rule would bring in, and without a revenue replacement, it appears 1099 repeal is stymied.

Some lawmakers are confident 1099 repeal will happen, but so far the idea hasn't gotten much traction. It may be months before the repeal movement gets in gear again, since the bill doesn't go into effect for a year, and Congress has many pressing problems on its plate. Not to mention a slew of new Congress members with their own ideas who'll just be arriving in January.

Are you concerned about 1099 repeal? How many 1099s would your business have to fill out if this rule becomes law in 2012?

Carol Tice

Owner of Make a Living Writing

Longtime Seattle business writer Carol Tice has written for Entrepreneur, Forbes, Delta Sky and many more. She writes the award-winning Make a Living Writing blog. Her new ebook for Oberlo is Crowdfunding for Entrepreneurs.

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