Hidden in “The Patient Protection and Affordable Care Act of 2010” was an add-on concerning small businesses: IRS Notice 2010-51. Here it is on the IRS website http://www.irs.gov/irb/2010-29_IRB/ar09.html. The new reporting requirements will apply to payments made after December 31, 2011.
This is affects every small business in the United States, including visual artists.
The new regulation will require small businesses to complete a 1099 form every year for every business or individual you make payments to -by cash or check- which total over $600 in a year. Transactions by credit or debit card are exempt because those purchases are already tracked by other means.
Small businesses would be required to send an IRS Form W-9 (request for taxpayer ID or social security number) to every business or vendor they purchase from, and produce an IRS 1099-Miscellaneous Income form for each of those businesses and vendors at tax time. If you don’t get their number and if you don’t file a 1099-Misc for each of them, you will have an additional withholding reporting requirement on your annual income tax. This will be a huge time and accounting burden for small businesses.
There are a lot of objections from all directions to this requirement, from different types of small business organizations. It also seems that the IRS changes its rules and reporting requirements all the time, irrespective of what was stated in legislation, so it’s anybody’s guess where this regulation will end up or if it will be enforced.
The Graphic Artists Guild sent the IRS a comment letter on Notice 2010-51 in September 2010.
Senator Mike Johanns (R-NE) has introduced S. 3578 the “Small Business Paperwork Mandate Elimination Act,” which has been referred to the Senate Committee on Finance. The Graphic Artists Guild urges graphic artists as small business owners to write to Senator Max Baucus (D-MT), the Chair of the Senate Committee on Finance, as well as Senator Kent Conrad (D-ND), the Chair of Subcommittee on Taxation, IRS Oversight, and Long-Term Growth, and let them know that you support S. 3578 and you want the Committee to move this legislation forward.
More information about this legislation at http://www.govtrack.us/congress/bill.xpd?bill=s111-3578
Senator Max Baucus’ web form email http://baucus.senate.gov/?p=contact
Senator Max Baucus’ Fax: (202) 224-9412
Senator Kent Conrad’s web form email https://conrad.senate.gov/contact/webform.cfm
Senator Kent Conrad’s Fax: (202) 224-7776
We’ve provided a sample letter for you to email or fax.
City, State zip
To: Honorable Senator Max Baucus
To: Honorable Kent Conrad
Re: S. 3578 the Small Business Paperwork Mandate Elimination Act
Dear Senator [Baucus] [Conrad],
I am a [insert discipline], a small business owner and handle my own business paperwork. The new Section 6041reporting requirement of the Internal Revenue Code would create a tremendous burden on my business, obligating me to spend additional unbillable administrative time on paperwork.
I typically spend at least $600 a year with a variety of stores and vendors, such as office supply stores, photocopy shops, art supply stores, electronics retailers, printers, fabricators, and many online vendors, as well as licensing fees for usage of other’s copyrighted work. Some purchases are made by credit or debit card, but many are also made by check or cash.
If the new Section 6041reporting requirement were enacted, these stores and vendors will also incur a huge increase in administrative labor hours to process the additional paperwork from small business customers like me. Those cost increases will be passed along to every consumer increasing the cost of goods and services. The IRS will need to increase in staff as well to process this additional paperwork, increasing operating costs that will likely be greater than the revenue received from this new rule. It just doesn’t make economic sense for anyone.
I support S. 3578 the Small Business Paperwork Mandate Elimination Act, which will repeal IRS Notice 2010-51 in The Patient Protection and Affordable Care Act of 2010. I would like to see the Senate Committee on Finance move S. 3578 forward.
Member of the Graphic Artists Guild