Obamacare, 1099's, and $600 Expense Mandates

[MJ DeMarco]

Although this links to a political blog, keep the conversation down to the FACTS which is utterly disturbing for anyone that runs a thriving business.

http://www.saveyourrights.com/gover...d-all-business-transactions-in-excess-of-600/

In the Obamacare legislation is a new small business mandate that requires all businesses who spend more than $600 with any vendor to exchange 1099's. In other words, lets burden small business owners with mountains of paperwork.

This "provision" is now being exposed and hopefully will face a fight before implementation.

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In practical terms, here is what the new law means. Joe’s Plumbing prints up 100 color presentations at FedEx Kinko’s for a trade show in New Orleans, where they are staying at a Holiday Inn for six days.
At a minimum, Joe’s Plumbing will have to contact FedEx Kinko’s, the airline, Holiday Inn, the rental car company, and the organization sponsoring the trade show and get taxpayer identification numbers from them so they can comply with this tax law. The company will then have to send out 1099 forms to each of these vendors and dozens, hundreds or thousands more vendors, depending upon the size of the company, thus adding significant compliance costs to every business in America. Everyone from a company’s accountant, to building supplier, to carpet cleaner to janitorial service will be trading 1099 forms.
Yes, that’s right, trading 1099 forms, because at the same time, Joe’s Plumbing will also be receiving 1099 forms from every one of their business customers who spent more than $600 with them over the course of the year, which they will be required to keep and reconcile against their books.

While I understand this is to prevent loopholes and fictitious deductions, this amounts to not hours of research, BUT WEEKS.

On the flipside, if this provision becomes reality, there will be a GREAT OPPORTUNITY to create some type of accounting/software program that automates this process ... if this mountainous expedition of paperwork is done manually, you are looking at weeks of productivity down the drain. So while we all should bitch about this provision and try to prevent its reality, it creates an opportunity because thru inefficiency, opportunity is created.

 

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[kurtyordy]

From what I have read this will have a major impact on gold coin dealers.

 

[Runum]

I am glad you framed the conversation non political MJ. About 2 weeks ago I met with a new CPA for me. We spent about an hour talking about the future and strategies my biz can use to make some large expenses to work better for me. She's even a Diane Kenedy reader. She told me that there are so many changes on the books RIGHT NOW that it is difficult to do the strategic planning I desire.

Then I read this article today:

The Tax Tsunami On The Horizon - IBD - Investors.com

So it appears we have our challenges coming but our foe is not clearly defined yet.

 

[Guest3722A]

I am glad you framed the conversation non political MJ. About 2 weeks ago I met with a new CPA for me. We spent about an hour talking about the future and strategies my biz can use to make some large expenses to work better for me. She's even a Diane Kenedy reader. She told me that there are so many changes on the books RIGHT NOW that it is difficult to do the strategic planning I desire.

Then I read this article today:

The Tax Tsunami On The Horizon - IBD - Investors.com

So it appears we have our challenges coming but our foe is not clearly defined yet.

Unfortunately times are changing quickly (once again) and it seems that the tricks of the past are going to require some adaptation.

What makes me confident about the future of the next generation of wealth is that those with it today are quite ingenious and I doubt will be held down for long.

The loopholes will be found, as they always have.

Billionaire Anschutz Loses Big Tax Case - Forbes.com

 

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[andviv]

so, if my office has DirecTv and pay more than $600 for that fee, a 1099 is required?

 

[MJ DeMarco]

so, if my office has DirecTv and pay more than $600 for that fee, a 1099 is required?

Yes. You will need to track down DirectTV's FEIN, complete a 1099, and mail it to them. Sounds like a revenue bonanza for the US Postal Service huh? :cuss:

 

[CommonCents]

The oppty would prob be some add on program for quick books.

 

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[Bilgefisher]

My favorite coin shop told me he will have to process over 400/month more documents to keep up with the change. He knows other coin shops that will deal with over 1200 per week. To keep up with that volume would require 2-3 more staff members. Simply not affordable.

The coin shop owner stated he will close his doors when the new law goes into effect.

Coin shops do small volume. Imagine the cost of goods going up to compensate at places like best buy or walmart or your favorite furniture store.

I think this will cause untold thousands of stores (mostly small ones) to fold or simply ignore the rules. I can imagine a lot more cash transactions under the table will take place.

 

[mrshowtime3]

Im thinking most small businesses will simply not do it and take their chances. Its one of the most absurd things Ive ever heard.

 

[Russ H]

My brother was very much into coins back in the 1970s (and made a potload of money, back in the day).

Even he was impressed at the large amounts of $$$ that changed hands, with little or no record of the transactions.

There are lots of businesses in the US that are "cash based" where the owners declare only a small percentage of their actual earnings. MOST of them have average transactions less than $600/year (restaurants, hair dressers, small stores).

Just think of all the places you go and pay cash. Then think of the places you go and HAVE to pay cash-- credit cards are not allowed.

Literally billions and billions of dollars are changing hands, sometimes with no record (or a receipt is given, but conveniently "lost" on the store's end).

I don't think the massive bill intended to regulate all of this-- and I'm sure there will be additional clarification (perhaps even reduction in where it applies).

But you have a business that painstakingly tracks EVERY penny that goes in and out, you have to admit, it's a bit frustrating to see others not doing it.

Another favorite area of abuse is subcontracting-- many businesses give employees 1099s and declare them as subcontractors, but they don't meet the minimum requirements (some of which include they need to provide all of their own tools, set their own schedule, works for more than one employer, etc).

-Russ H.

 

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[MJ DeMarco]

I think this section of the bill will be "fixed" ... there are already bipartisan rumblings to have it changed. That is good news.

 

[Russ H]

I think this section of the bill will be "fixed" ... there are already bipartisan rumblings to have it changed. That is good news.

Agreed. I'm sure there will be a way to use technology to everyone's advantage in tracking revenues (and I'm all for that), but this sure didn't sound like the way to do it! :smx4:

-Russ H.

 

[Bilgefisher]

I agree as well. The sure way to make folks not do something is make it costly and a pain in the neck.

 

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[max momo]

Hi,

I have been following this one closely because it will add new requirements for me.

1) There are No New Taxes
There are no new taxes (almost everything is already taxed. What currently is not taxed will be taxed soon after Obama’s tax writing committee [official doublespeak: US National Debt Commission] comes out with their proposal right after this fall’s election. A central plank to ‘reduce the debt’ will be the creation of the Value Added Tax(VAT).

The VAT - a tax on every transaction - will be a central plank, count on it, no matter how it is couched.

You will be forced into the position of monitoring other's financial transactions and acting on behest of the IRS.

The IRS does not need to be ready to enforce regulations.

Like all rules and regulations, they were not designed to be universally followed - only SELECTIVELY ENFORCED. You will carry the water for the IRS at the threat of CRIMINAL and CIVIL PERSECUTION (or, as is more standard, threats of such).

The 2011 and 2012 provisions are setting up a mechanism whereby we all report on each other to the IRS. This process and mechanism is a rollout preceding the VAT.

The IRS is already preparing for the brush back from the small business owners in the US (i.e. the new dinosaurs).

The IRS Is Looking For 60 12-Gauge Pump Action Guns To Arm Its Investigators

2) The Liability is on the Buyer

THE BUYER is required to file the 1099 for YOUR purchases. Purchases covered are anything over $600. If you try to make more than one serial purchase of $595 to get under the trigger, that will cause you a fine. Just as the current reporting cap is $10k and serial financial deals to avoid that amount are a federal crime, called ‘structuring’, just to catch al Qaeda dontch know.

That’s right, now YOU must acquire ‘personal information’ (social security number) from anyone that sells you something over $600.

And when you buy… Sure, you WANT to give your Social Security Number (SSN) to dozens of merchants every year, RIGHT?

SURE THEY WILL ‘change’ the LAW.

You think WalMart or Apple or Microsoft is going to have to follow this provision? HAH har!, funny.

No, the burden IS ON YOU; the citizen small business owner.

Big corporations have lobbyists and lawyers to avoid this type of thing.
That’s what your tax dollars go to, new regulations that further increase your paperwork burden, and decrease your ability to compete against the vested interests.

3) The Burden is On YOU
The burden of being up to date on tax law is placed on the tax payer. That is why those in the tax industry fight so hard (e.g. write new legislation via their lobbyists on K street) for new incomprehensible regulations, so that you then must hire a ‘professional’ to sift through the garbage and render a ‘tax strategy’.

Of course, the IRS loves new regulations, especially poor ones. Nobody writes regulations so that you can effectively follow them, regs are written so they CAN BE SELECTIVELY ENFORCED.

Rule of Law no longer exists; unevenly enforced regulations replaced that old relic canon.

4) The Law Impinges upon the Small Business in Favor of Big Business
Since you don’t give much to the political campaigns, you are simply an unnecessary waste of resources.

Mom and pop vintage stores, ebayers, pocket vest coin dealers, antique stores, pawn shops, will be CRUSHED because THEY must collect SSN from Everyone that sells over $600 in one year (less thatn HALF a one ounce gold coin!).

Oh, BTW, the $600 figure is CUMULATIVE over the year. You can’t sell a quarter ounce now and a quarter ounce later to avoid the trigger.

Big businesses typically only buy form 10-20 vendors/distributors, so it's not like they can’t have their CPA and accountant send out 20 more forms on top of the stack of paperwork. How many accountants work in your business that are staffed to collect SSN for a few hundred buyers off the street so that them may in turn send a 1099 to the IRS for that same purchase? (Oh yea, keep those files for seven years in a separate box when THAT audit comes knocking).

The American Institute of CPAs already put an objection into the rule making deliberative process b.c. they don’t want every useless citizen calling them up and asking questions.

6) Don’t like the 10% VAT?

Good, because they govt wants you to pay 28% instead!

See the National Taxpayer's Advocate paper criticizing this law.

[28% ‘withholding tax’ (same as capital gains rate, go figure) applies if the seller does not provide a valid Taxpayer's Identifying Number or SSN].

5) Of course they will REPEAL some sections for the ‘hardworking american families’. Specifically, the caring politicians will write in these exemptions right before the presidential election to show how much they care:

- Gas
- Groceries at the market
- crap you buy at chinamert for Christmas presents

Let’s face it, when you can ONLY afford those luxuries, you aren’t worth the bureaucrats time.

Because, fact is…

6) THIS IS AIMED at TRACKING PRECIOUS METAL PURCHASES

OH, you haven’t noticed that gold and silver performance has essentially out-performed ALL other investment classes EVERY YEAR FOR THE PAST DECADE?

Well, some other folks have noticed, I can assure you of that.

Remember,
1) The government hates competition, which is why counterfeit is heavily penalized
2) Substitute comptetion against the Federal Reserve Note debt instrument issued by their friends and cronies at the Federal Reserve Corporation will not be tolerated (that is, specie)
3) The IRS and TREASURY do not want you to understand how and why species has been THE currency for 6,000 years.
4) Too many folks who bought UNTRACEALBE gold and silver at ¼ of today’s prices ARENT paying the 28% tax; that will change.

One major intent of this law is to kill the gold and silver trade by requiring the SSN and 1099 for most purchases. This proviso in Obama’s health care proviso to require a 1099 tax form for any gold sale over $600 is designed to do just that - kill the trade.

Gold has always curried favor in part b.c the trade is anonymous. THis provision, requiring the buyers and sellers of gold to provide a SSN number and receipt to the IRS for every purchase of ½ once or more removes the anonymity of gold.

The government hates anonymity of the citizenry.

Right now in California you MUST provide a THUMBPRINT, SSN and PHOTO ID to recycle aluminum cans for a few bucks.

Just wait to see what else will be required for gold and silver transactions.

You know, BECAUSE THIS IS A GREAT HEALTH LAW THAT WILL IMPROVE EVERYBODYS LIFE!!!

(especially the little people)

he he, eh?

 

[theBiz]

i agree with max, large companies are going to get out of it somehow while small businesses... i do not even know how they are going to handle it.

To me this is just another in your face thing that the government now does NOT want small businesses operating, if things like this do not make it obvious i do not know what to tell you.
All they talk about is globalization and competing on that level now every biz owner is going to have to file 100s of stupid un-necessary papers every month, so sophisticated....? This is going backwards they know it, you know it, they want small biz out, plain and simple.

 

[Russ H]

Wow, max, some of the stuff you have said in the past has been very intelligent.

But I just don't know where to start with this latest tirade.

Clearly MJ's post touched a nerve for you.

I'd like to point out just a few innaccuracies-- not to you, but for other readers of this thread:

1. None of this has happened yet. Don't state it as fact. Please, let's see what happens.

2. Whining about things "that might be" is a favorite American pastime. But not on the fastlane. We actually have anti-whine, anti-self pity policies here. Posters who whine and don't propose solutions have actually been banned.

3. MJ posted this as a golden opportunity-- where typical whiners see problems, fastlaners see opportunity. This post is devoid of solutions; it only moans about problems that might be, someday.

Maybe.

4. Your statements about large companies having only 20 suppliers is so misinformed, and wrong, as to be truly funny. Do you think that by saying it, it's true? It's not. As just one example, an average Automotive manufacturer has thousands of suppliers.

5. Your further assertions that small business has been squashed is, again, pitying, and laughable. We got over $1 million in SBA loans between April 2009 and April 2010. We actually found (quite by accident) a website put up by a local govt rep that listed just the TARP loans in his district (since the word on the street was that no one was getting anything). Just for our small corner of the world, there were HUNDREDS of loans to small businesses-- an area that's about 1600 square miles (the US has over 3.5 MILLION square miles).

And we do fall in the category of "small business": We actually grossed just shy of a million dollars in revenues last year.

So, I guess we're left to conclude that you're upset. And see the downfall of modern society as we know it when this goes into effect.

Me?

I'm gonna do what I've always done, and exactly what MJ is doing:

I'm looking at my options now, and planning.

And I'm going to ACT as soon as I know exactly what's happening.

And, as in the past, chances are I'm going to profit from this.

Why?

Because while others are still walking around complaining, and moaning, we'll be figuring out ways to survive-- and thrive.

-Russ H.

 

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[Russ H]

This is going backwards they know it, you know it, they want small biz out, plain and simple.

The biggest determinant in your business's success-- or failure-- is YOU.

Take this attitude, and you're already doomed.

-Russ H.

 

[Runum]

Thanks for the rebuttal Russ. +++speed

 

[max momo]

Russ,

(not sure how to do the quote/reply), so here is the text:

[1. None of this has happened yet. Don't state it as fact. Please, let's see what happens.]

No, actually the law has been passed. That is a demonstrable fact. The regulations are currently in draft form. The fact that the trade organizations have already submitted comments underline this point.

2. Whining about things "that might be" is a favorite American pastime. But not on the fastlane. We actually have anti-whine, anti-self pity policies here. Posters who whine and don't propose solutions have actually been banned.

Whining/Tirade? I don't think so. KurtyOrdy pointed out this would impact coin dealers. I simply exanded upon the point, nobody else did. Yes, perhaps a little flowery images. That is what it takes sometimes to move someone to petition the rulemaking agency. The legislation is clearly aimed at tracking specie.

3. MJ posted this as a golden opportunity-- where typical whiners see problems, fastlaners see opportunity. This post is devoid of solutions; it only moans about problems that might be, someday.

Actually, nobody posted any good actions, not you either. Here they are:
Silver is a substitute trade, so are small/fractional gold coins. Even though you can't sell four 10th ounce coins to one dealer, you can sell that amount to ten dealers. There are others, but those are two freebies!

4. Your statements about large companies having only 20 suppliers is so misinformed, and wrong, as to be truly funny. Do you think that by saying it, it's true? It's not. As just one example, an average Automotive manufacturer has thousands of suppliers.

Indeed, I had meant to state 100-200 instead of 10-20. Nevetheless, you example of an automotive manufacturer harldly represents the average firm.

Your anecdote about small business does not comport with the U6 or a number of other small business employment figures.

Am not upset, this will actally help my business model quite a bit. Simply put up some facts and details of the legislation, which nobody else did.

Regards.

 

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[Russ H]

Max, I didn't aim my response at you, b/c we see things differently.

Where I see opportunity, you see problems.

Where I see things that will change when tax time comes (as they do every year), you seem to think that everything in this bill is unchangeable.

You see this as presenting the TRUTH. I see it as needless fear mongering. Why worry about something that will most likely change, or be phased in over several years once the Hill starts hearing from constituents?

I appreciate your responding, but I really didn't intend you to. Your answers ("freebies") are aimed at circumventing this. My approach would be to take advantage of it-- figure out businesses that will be seriously affected by this, and develop a cost-effective service. Or, to use your fears-- develop a business that feeds off of the fear/ignorance of small businesses. There are so many, many opportunities for any new big bill. It's mind boggling.

I think that's what MJ's original point was/is. At least that's how I read it.

-Russ H.

 

[Russ H]

Yes. You will need to track down DirectTV's FEIN, complete a 1099, and mail it to them. Sounds like a revenue bonanza for the US Postal Service huh? :cuss:

MJ, I would imagine that this would be available for filing online. Perhaps something that could then automatically notify (mail) the recipient. All automated.

And I'm guessing, as commoncents suggests, that there will also be software (or quickbooks add-ons) that automate the finding EIN process.

After all, most accounting firms these days have great software-- they charge us for inputting the numbers.

I see this as another biz opportunity-- accountants would be the likely candidates for it, if it actually gets phased in/becomes mandatory. You'd just submit a list of all your contacts, and the acct would plug them in, and have software that automatically generated the 1099 and plugged in your $$$ data.

I could also see the fines reduced for 1099s that are not filed (currently $25 for each 1099 not filed per year, I believe). If the fine was $1 per 1099, some businesses would just figure on a $1000 fine.

-Russ H.

 

[kurtyordy]

looks like they are going to just keep smacking us- http://www.washingtonexaminer.com/o...irement-in-new-health-care-law-102878604.html

 

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[MJ DeMarco]

looks like they are going to just keep smacking us- http://www.washingtonexaminer.com/o...irement-in-new-health-care-law-102878604.html

This actually is good news ... the first step is recognizing that it needs to be changed.

Senators just voted 46-52 against an amendment by Sen. Mike Johanns, R-Neb. that would have stripped out the provision, which requires businesses to report to the IRS transactions to anyone or any company that cost more than $600.

The Senate then defeated a similar amendment by Sen. Bill Nelson, D-Fla. Nelson’s measure, which went down in a 61-37 vote, would have raised the reporting requirement to $5,000 and excluded businesses with fewer than 25 employees.

Passage of either one of these would be a sufficient solution. Most small businesses only have a few transactions per year > $5000 ... the paperwork burden would be reduced by 95%.

 

[hatterasguy]

My thoughts:

1. They are going to get rid of this because its stupid and not practical.

2. I'm not going to bother with it and I'm sure no one else is, so its not going to be enforceable.

 

[Bilgefisher]

The election cycle will determine the fate of many many bills. The $600 paperwork will likely break many businesses. Does anyone know the main reason behind it?

 

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[MJ DeMarco]

Does anyone know the main reason behind it?

I'm afraid of going there, a political pandora's box.

 

[Bilgefisher]

fair enough.

 

[Russ H]

The election cycle will determine the fate of many many bills. The $600 paperwork will likely break many businesses. Does anyone know the main reason behind it?

Bilge-

I honestly don't know the reason, but here's my guess:

There are billions of dollars in unreported income each year, by folks who work "under the table". We don't do this, b/c we need all the tax write offs (so we 1099 everyone).

But let's say a business gets, say, $50,000 a year in CASH-- income they don't report (but are required by law to report). They could use this money to hire illegal or undocumented labor "under the table"-- paying all of them cash, w/no records of W2s, 1099s, or any taxes/deductions paid to the US or State governments.

This is, in fact, what is done-- and happens to the tune of LOTS of money per year (I once heard the figure of tens or even hundreds of billions of dollars-- which would not surprise me).

So if you require all these folks to document their cash flow, the govt can now start to collect taxes on all of this. BANG!--immediate huge revenue influx, in a year where adding taxes is death to politicians-- but taxing those who are avoiding the tax might be considered OK by the majority of voters.

Only thing is, small businesses wind up taking it in the shorts-- so I'm glad to see there is movement on this.

Sorry if that got political, MJ-- tried to make it as poli-free as possible.

It's more about documenting evasion than specific party politics. Both parties would love to get more $$$ for the govt-- but neither one wants to be the bad guy by raising taxes to get it!

-Russ H.

 

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[Bilgefisher]

Russ,

That actually clears it up quite a bit. And no it wasn't political.

Jason

 

[hatterasguy]

I love unreported income, I feel every dollar sent to the government is wasted and that they get to much already. I say screw them out of every penny. Good for anyone who is doing it.