Buried in Obamacare:
A Tax Compliance Nightmare for Small Businesses
The healthcare takeover bill rammed through Congress in 2010 will have profound consequences for years to come – not just in regard to healthcare, but for the economy and taxes as well. Especially vulnerable under the newly imposed chains of Obamacare are small businesses.
As the Cato Institute’s Michael Tanner noted in an article for the Daily Caller (March 24, 2010):
The biggest changes start in 2014. For example, that's when the individual and employer mandates start. Every individual will have to have a government-approved health insurance plan or pay a penalty equal to one percent of his or her income. The next year the penalty will increase to two percent. And in 2016, it reaches 2.5 percent of income or $2,085 per person, whichever is greater. Owners of businesses with more than 50 workers who fail to provide insurance to low-wage workers would face penalties of $2,000 per employee.
… The last component of the bill to kick in is the tax on so-called "Cadillac" insurance plans. Beginning in 2018, insurance plans with a value of $10,200 for an individual or $27,500 for a household, will be subject to a 40 percent excise tax.
Other provisions of the healthcare nationalization bill erect unprecedented levels of potentially suffocating new IRS compliance demands on small businesses. As CNNMoney.com reported, “An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.”
A few lines buried in the massive piece of legislation its supporters didn’t read (Section 9006) mandates that beginning in 2012 all business owners must issue 1099 tax forms to any individual or corporation they purchase more than $600 worth of goods or services from. CNNMoney’s analysis: “Why did these tax code revisions get included in a health-care reform bill? Welcome to Washington. The idea seems to be that using 1099 forms to capture unreported income will generate more government revenue and help offset the cost of the health bill.”
The mandate will also be a compliance nightmare. As the Air Conditioner Contractors of America warned:
Consider all the payments a small business makes in the course of business, paying for things such as computers, software, office supplies, and fuel to services, including janitorial services, coffee services, and package delivery services.
In order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold on your payments.