Small Business Nightmare via the IRS

Those of us following the public policy issues associated with small business and entrepreneurship are having a hard time keeping up these days.

There is a change coming in 2012, that could drown small business under a sea of paper work.  It involves a huge expansion in the requirements to file 1099 forms.  Historically, 1099 forms were used by the IRS to capture income paid to freelance workers and other independent contractors.  But not anymore.  Now 1099's will need to be filed for hundreds and even thousands of transactions entered into by small businesses.

And where did this change come from?  The massive healthcare bill that nobody had time to read before it passed.

So what changes?  From CNN-Money:

Until now, payments to corporations have been exempt from 1099 rules, as have payments for the purchase of goods.

Starting in 2012, that changes. All business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you're making the payment to -- even if it's a giant retailer like Staples or Best Buy -- at the time of the transaction, or else facing IRS penalties.

In essence, the 1099-Misc is having its role changed from a form for tracking off-payroll employment to one that must accompany virtually any sizeable business transaction.

The blogsphere is buzzing with this news.  For example,  Gary North is calling it "The 1099 Tsunami" and Mike Adams labels is as "1099 tax form tyranny."

To me it is yet one more example of a shift in our public policy to an anti-capitalistic and anti-entrepreneurship form of government.  Stay tuned for many more stories like this over the coming months....

(Thanks to Andy Tabar for passing this along).