A bunch of uninformed whining is hardly in-depth. You'd think you couldn't file these electronically or that people have to create, gasp, invoices for the vast majority of such transactions.
Cool so where do I send the 1099 for SAMs club, Office Depot, and the restaurant down the street to? Will you come deal with the reporting discrepancies for me. I'll be getting at least 1000 1099's a year, will you deal with those for me? This is needless bueracratic bullshit to the maximum.
I hate to break it to you, but a whole lot of people in the US don't have accountants and yet still spend more than $600 at various stores over the course of a year.
As the article notes, this doesn't apply to individuals, no matter how much money they spend at a store per year; it only applies to businesses, who are already required to keep track of their business expenses.
Individuals are small businesses too. Consultants, contractors, lots of people. More people, yes people, file a Schedule C than you might be aware of. Hell, someone who does a lot of business selling stuff on eBay or Craigslist is subject to this I they're reporting their income from that activity. Many do.
Sure, I file a Schedule C myself (for a pretty tiny side business). But I also keep track of all the expenses for that, since I have to to report on the Schedule C, so it's trivial for me to determine if I paid anyone more than $600 this year (just export my expenses from Gnucash, grouped by payee). And yes, it'd be an added hassle to file 1099s, and I don't really support it.
My main point is that, contrary to the impression some people here seem to have, non-business expenses won't require 1099s. The discussion here (in particular the thread I was replying to) seemed to think that the law would require their grandmother to send Best Buy a 1099 if she spent more than $600 on her new computer, or that you'd have to add up all your Home Depot receipts to see if you spent more than $600 on home-improvement this year, which isn't the case.
This is at least a full time job, probably two, and maybe three depending on how many of our clients get the reporting wrong. That's a cost of $100k - $300k each year just for the accountants. Let's not forget that some clients will misreport, so we will need to chase them down and deal with their accountants and lawyers.
And remember, if the numbers don't match you'll also need a tax lawyer, because you'll be getting audited. Off by more than 25%, have fun in prison. This is a major, onerous reporting process. If you have a $50/month service with 1000 clients, you're doing $600k. This will eat at leSt half of your gross.
And how; a service that just catalogues tax IDs and handles sending out the right paperwork would make mint... this might be perfect for somebody like Indinero (a recent YC addition).
It's things like this that will eventually force me to move my business (and invariably, my employees) to another country. Why do they want to make it even more difficult for small businesses?
Dont pull that Patriot crap. Probably all the Fortune 1000, particularly the drug companies, are flowing revenue through tax havens to lower taxes. There was an article in the past couple of months about it, here I think.
Most small companies cant do it, but HN style companies can. Push fulfillment to Ireland, development anywhere. Let Ireland charge through the noose, and let the euros pile up in Switzerland.
"Dont pull that Patriot crap. Probably all the Fortune 1000, particularly the drug companies, are flowing revenue through tax havens to lower taxes. There was an article in the past couple of months about it, here I think."
If you open a company in another country, tax collection is under the jurisdiction of that country, not the US. I'm also not advocating no taxes, I just wish the Obama administration would think about the consequences of these types of decisions.
I'm also not trying to "pull that patriot crap". I'm just giving you the consequences of making it difficult for me to do business in the US. I will move my business elsewhere, which will also mean a loss of jobs for US workers. I know I'm not alone with this.
That's odd. If I, as an individual, work with a work visa in another country, while living and paying for myself in that other country, I am still subject to US taxes on that income.
IIRC, most other "western" countries don't do that, but I could be wrong.
Wow. Jump to conclusions without evidence? Sign me up!
More likely it was an attempt to close a perceived tax loophole without understanding of the cost of compliance. I have no doubt it will get fixed before it actually goes into effect.
Part of what they are doing is getting the system ready to put a sales tax on services. That will generate some serious revenue (or provide another effective mechanism to steal money from some people to give to other people, depending on your perspective.)
Aren't services already covered by most states' sales taxes? I paid sales tax when I got my oil changed recently, and my VPS provider charges sales tax if I'm in the same state.
It doesn't matter where the shipment is from; if the business has a point-of-presence in the shipped-to state, they charge you sales tax for that state. For instance, I bought some stuff at the Pendleton store in Portland, Oregon, and had it shipped home to Illinois, and the clerk (very apologetically) told me that he'd have to charge me sales tax since Pendleton owned stores in Illinois. This despite the fact that I was physically in Oregon, the sale was taking place in Oregon, the blankets were still in Oregon, and Oregon has no sales tax at all.
No. There are exceptions, usually made to extract revenue from particular services, sometimes targeting people that don't live in that locality, like hotel taxes, but very seldom do they tax things like attorney services (wonder why...) or software development.
This is also an option that would be useful in creating a VAT, if the government has access to all of these transactions. Sadly, the states already tax most of this money and it would look bad to have Feds move in there. However, the gap in service taxes would appear to be an opportunity, especially in B2B taxes which would be invisible to most people.
maybe? the problem is that if I pay you under the table, I'm paying you out of /post tax/ money. this is to say, paying people under the table costs me about 50% more than reporting it. I don't think 1099s jack up the cost /that/ much.
Anyone know why this was put into the bill? What good intentioned upside someone is trying to accomplish?
To make sure that retailers/sellers are accurately reporting their sales and not lowballing their revenue numbers on their tax returns. It's basically to reduce tax fraud with the hope that the extra tax income (which is assumed that corps or fraudulently not paying) can be used to pay for health care without having to add additional taxes.
This will be an unmitigated disaster. Office Depot will get 50 million or so 1099's. How do you deal with that many accounting discrepancies? How do you match that many transactions to all those forms. What about under and over-reporting? This is a Democrat clusterfuck if there ever was one.
You're saying there are no customers of Office Depot that make a total of $600 in purchases in a given year with means of payment other than a credit card (e.g. cash, purchase order, or check)? Seems quite unlikely.
Sure there is some, but it's impact is going to be far less than a 1% tax increase on them. Especially when most small business start using CC to avoid the hassle and or simply ignore the issue.
Edit: Thanks for the down vote, but as a practical matter the IRS is going to use this as an audit trail. So a company needs to report revenue > the submitted 1099's. While they will get some 1099's their reported gross income is going to be dominated by people who don't need to send 1099's so it's going to have minimal impact. Note: There is zero new tax implications, it’s simply a reporting issue so being sent 1099’s DOES NOT IMPACT the taxes they pay.
The people receiving 1099's that are going to suffer are those who try and hide income. Companies are going to need to report revenue > 1099's or the IRS can easily find issue based on that discrepancy.
On the other hand Apple is going to need to send a lot of 1099's out to developers.
More likely: most businesses will completely ignore this rule. It will either go away before it comes into force or it will be so impractical to police that it will be useless.
The trouble with rules that remain on the books despite not usually being enforced is that they create opportunities for selective enforcement when they decide to crack down on you for other reasons, such as your political views.
In any case, the final impact of the law won't be known
until the IRS issues its regulations on the new law,
which aren't expected to arrive until sometime next year.
The IRS has not yet commented on when it will release
regulations or schedule public hearings, and an agency
spokesman was unsure when it will do so.
another quote: "Rep. Dan Lungren, R-Calif., introduced legislation last week that would repeal the new 1099 requirements."
Bottom line, a misguided attempt to improve income reporting and tax collection is going to be either watered down by the IRS or killed in congress. Maybe I'm a sad optimist, but to me it looks like democracy's still working well :-)
Democracy would be allowing the populace the time to read and digest multi-thousand page bills before voting, and not allowing totally unrelated sweeping changes hidden in bills. This has nothing to do with health care, whatsoever, in any way shape or form.
Then you haven't been paying attention to either health care in general, or the health care effort in specific.
The health care bill was effectively implemented as a tax bill. The entire structure of the bill is a set of rules and initiatives set up to encourage businesses and individuals to get or provide health insurance through a series of tax raises and tax cuts.
The tax code is the mechanism through which this policy is implemented. I'd love to hear what other mechanism you'd prefer for implementing a health care plan. (And copping out by saying "it shouldn't have been implemented" isn't gonna fly)
Except that defending the nation is all over the constitution, whereas giving people health care for free isn't anywhere. Specifically in the preamble, when referring to the "common defense" the framers used the terminology "provide"; when referring to the "general welfare" the term promote was used instead. Air Forces didn't exist then, but health care certainly did.
Article 1, Section 8: The Congress shall have Power To [...] raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;
Are you seriously going to argue that "Armies" doesn't include the Air Force?
Specifically, I meant that the constitution explicitly gives each of the Army and the Navy cabinet-level power and responsibility. The Air Force was given the same power and responsibility, without amending the constitution.
That's not a very good example. The Cabinet consists of the heads of various Departments, whichever ones the President wants to hear from at any given moment. The Departments are created by Congress.
An Amendment wasn't required to create the Air Force any more than it was required to create the DHS, or is required to create any other Federal agency. Congress has the power to create, destroy, and reorganize Federal agencies as it wants to. So in 1947, Congress created the Department of Defense as a Federal Department, which the Constitution allows them to do, and put the Army, Navy, and Air Force (new) under it. There wasn't anything even vaguely unconstitutional about it, even taking a really uncharitable reading.
Congress creates new Departments fairly regularly; there wasn't a need to go through the amendment process for the DoD any more than there was to create the Departments of State, Transportation, Energy, Labor, Education... etc. All it takes to create one is the same process to pass any other piece of legislation.
I would personally not be against requiring an amendment to create new agencies, just on the grounds of controlling governmental scope creep, but that's not the way things are set up. Congress has been creating Departments since the ink was barely dry on the Constitution itself.
Actually, I think I agree with you. They should change the org-chart and put the AF back under the Army.
I still don't understand your comparison to Obamacare. Are you asserting that the constitution would authorize Obamacare with some tweaks to heirerarchy? Please explain.
How is the magnitude comparable? Obamacare is not authorized by the constitution at all - to become constitutional, it would need to be eliminated. To become constitutional, the Air Force would need one arrow in the org chart to be changed.
I don't see the changes as being remotely comparable in magnitude.
We don't live in a true Democracy. We live in Republic which is significantly different. We elect representatives on our behalf that we entrust to read and digest multi-thousand page bills and vote on our behalf.
But realistically it's not in the realm of humanly possible things for elected officials to read all those documents so we should be blaming the assistants and clerks for not reading them right ;p
Congresscritters are constantly introducing legislation. Most of it goes nowhere. That is doubly true when it is introduced by someone from the party that is out of power.
Unless you hear about Democrats getting behind repealing this, you can ignore Republican attempts to do so. (This may change after the midterm elections. Though the most probable outcome is to wind up with deadlock because nobody can break a filibuster.)
There are also lawyers from all sides of the political spectrum who say this won't survive a challenge in court because of the burden it creates and other reasons (can't find the original quotes right now sorry).
Or hurt it by forcing people to use a less efficient supplier. Competition is only good if it organic in nature, (ie: comes about because both have efficient methods and high quality products, even though they differ to some degree) not if it forced competition. Then you end up getting a worse product when you could have gotten a better one.
The good news is that purchases made with a credit or debit card will be exempt from this requirement. However this requirement is still likely to be a huge pain for me at least because I use PayPal for a lot of vendors for totral purchases over $600 in a year.
Exactly. I'd assume most businesses do nearly all their purchasing through credit/debit card. I know we certainly do. So I don't see how this is such a big deal.
Thank's for bringing this out - it really gets to the heart of who is getting paid off and the results of lobbying in creating artificial barriers through regulation.
Ostensible justification is likely along the lines that the IRS can already track credit & debit card purchases far more easily than purchase orders, checks and cash. Regardless, this would be a major boon for the credit card industry if it in fact goes forward as planned.
This has to be the most mind-numbingly stupid thing I have seen the government do in the last couple of decades -- and that includes bad wars, if that's your thing.
Why can it be so bad? Because it screws with every single economic entity in the nation, in a way that pervasive, subtle, and micro-managing.
If you want to know where "1984" is, with Big Brother watching all of your moves, it's not bullshit programs like TIA. It's making you rat out the guy who is on disability but mows lawns on the side, or the guy who paints houses at nights without reporting the income so he can send his kid to school. Or the mom that babysits kids so that she can stay home.
Yes. These people are law-breakers. In a web of such complexity that 80% of IRS's own employees can't answer sample tax questions, we are all law-breakers. But this takes tax collection to a new low -- now I am going to be responsible for "double-checking" on my neighbor who sold me those used lawn mowers last year. I need to do my part to make sure he's reporting everything.
It is so outrageously stupid and infuriating that I still can't believe it is true. I'm beside myself. So if I eat at Burger King during the week when I travel, about the 120th time I buy a burger, I need to chalk them up for a 1099.
It's the worst thing for small businesses and the underground economy that I've ever heard of the government doing. It just can't be true.
</rant>
ADD: And don't get me started with some bullshit about how the agency hasn't decided yet how to enforce it. This is like saying the Congress voted to install cameras in everybody's homes, but that might not be so bad because the administrative work hasn't been done to decide who exactly gets a camera and when. As if this somehow mitigates things.
Also, for all of you folks down-voting me. Tell me I am wrong. I'm not a tax professional and I don't read the political spin sites. The only reason I've commented now is that this is the 3rd or 4th time I've seen this posted on HN. So please. I would love to be wrong about this.
Man, talk about hyperbole. This is probably a terrible idea economically, but it's hardly a Nineteen Eighty-Four scenario. It's not becoming illegal to say "the IRS sucks", the IRS will not have cameras in your house looking for the slightest sign of dissent, and it'll actually be nearly impossible to get imprisoned for anything at all (tax penalties are generally merely more taxes, unless you deliberately lie).
Also, you, as an individual, won't have to send 1099s to anyone, whether your baby-sitter or lawn-mower or Office Depot. Only businesses will, though this does include small businessmen and sole proprietorships (the way to distinguish a sole proprietor from "just a person" is by whether you're deducting those expenses as business expenses on a Schedule C or not).
And the enforcer gets to decide who is allowed to live normally and who isn't. And that, IMO, is the scariest part of the whole thing. Don't piss off the DA or the police.
This is a 1984 scenario, because virtually everyone becomes a criminal, as everyone will fail to fill out all the proper 1099's. Consequently, at any time you do something the government doesn't like, they can come and get you for those incorrectly or unfiled 1099's.
(Reiterating what madair already replied to sprout, but I felt his point was not as clear as it could be)
That would require that "virtually everyone" is a business, which is not the case. Somewhere less than 5% of the U.S. population run businesses. Again, contrary to the misinformation rampant in this discussion, individual expenditures that are not business expenses won't require 1099s. (Did anyone even read the linked article?)
Even if that were not the case, it would hardly be a 1984 scenario, especially given that there are no criminal penalties for failing to file the 1099s. That's pretty absurdly embarrassing hyperbole that makes you sound like you came from DailyKos or something. The war on drugs is more of a 1984 scenario than requiring 1099s is, especially since it comes with widespread criminal penalties.
To add to your point, a couple weeks ago I saw a dozen hysterical media reports concerning another provision slipped into the bill, this time regarding the sale of gold. Supposedly, the government wants all gold sellers to report any transactions exceeding $600. I've researched a bit and it turned out to be the same legislation - only sales between businesses are required to be reported, and there is nothing specific about gold, it's just part of the same 1099 provision.
Don't get me wrong, I've been outraged by the practice of concealing unrelated bits of legislation inside various bills for years, but to say that this is worse than war is truly an exaggeration. Major annoyance, yes, but still quite a bit better than being shot.
It's not a 1984 scenario, no one has video surveillance in their house, and you can have sex without being executed. You win.
On the other hand, this is a pretty big deal, and your reply doesn't justify it. Yes, not everyone "is" a business, but everyone relies on the economy every day. Adding a not insignificant overhead to the companies that bring you food, water, electricity, etc. makes those items more expensive. Also, increasing overhead in businesses makes it harder to start businesses, which is sort of relevant given that we're on YC news.
Seriously. Chill out. The thing hasn't even been finalized yet, and there'll be public comment periods and reviews and all sorts of other stuff providing people an opportunity to go froth at the mouth about how this will be the end of the world or whatever.
In the meantime: take a deep breath. Relax. Read and learn. Get as much information as you can instead of going off half-cocked. And actually think through the things you'd like to say, because hyperbolic rants don't do anyone a damn bit of good.
It's my understanding there is a specific exemption to any purchases made with a Credit Card.
So now it's non CC company to company transactions > 600$/year which is a far smaller pool. The absolute worst possible case is total revenue / 600$ but the reality is most companies have a fairly small number of suppliers. So something like Ln (revenue / 1000) for the average small business.
This will likely boost the prepaid anonymous credit card business (for those who don't like the government being able to track how they spend their own money).
Haven’t these been targeted by government regulation in the last couple years? I remember reading about police agencies wanting these banned (along with pre-paid cellphones) for enabling the drug trade.
> The thing hasn't even been finalized yet, and there'll be public comment periods and reviews and all sorts of other stuff providing people like an opportunity to go froth at the mouth about how this will be the end of the world or whatever.
The legislation has been "finalized". The regs aren't written, but the mandate is pretty clear, so they can't have much effect.
If you're a biz and you pay in certain ways, you will have to issue a lot more 1099s than you do now. Regs may change the number by 1-2%, but they won't affect the order of magnitude.
Incidentally, free-enterprise as you describe it is essential for freedom of speech. If everyone's income becomes incumbent on the government, then they don't want to say anything to piss off said government.
In this case the report was produced by the Hearland Institute which Wikipedia describes as "an American conservative public policy think tank based in Chicago, Illinois that advocates free market policies."
Based on some of the bullshit they have published when it comes to global warming, they seem to be more interested in pursuing a political agenda than sticking to the facts.
"Most scientists do not believe human activities threaten to disrupt the Earth's climate."
"The most reliable temperature data show no global warming trend."
"A modest amount of global warming, should it occur, would be beneficial to the natural world and to human civilization."
"The best strategy to pursue is one of 'no regrets'."
How do you know they are telling the truth? Maybe this is just scaremongering from a group with a certain political agenda. Before getting excited it would be nice to see the same information from a less biased source. How is that not relevant?
Man, I wish I could cancel laws just by getting a "conservative public policy think tank" to talk about them; have you actually got a link to anyone contradicting this? Because so far I haven't seen one.
I am a little concerned about this. While I do some consulting work for large companies and we do 1099s anyway, I also do a lot of very small projects (mostly helping other developers get started or get up to speed on something I know more about than they do). For these little jobs that are paid for via PayPal, now small customers need to do a 1099 with me - a hassle for them probably means not as many little 1 week jobs.
Also, as a consumer of goods and services, now I need to do a 1099 for Amazon, people I hire for small bits of work, the local electronics store, etc.?
As for getting paid for small jobs and paying people for small jobs, if you paid the person more than $600 in a tax year, you should have already been giving/receiving 1099s.
The only difference with the new rule is that you'd have to give 1099s to vendors.
We are OK on paying vendors: for hiring a handyman one or twice a year, a plumber about once a year, and a brush removal service we are under the $600 limit - we mostly do things ourselves. I am more concerned with small customers who pay me a thousand or two a year via PayPal - now they have hassles. It would be really good if PayPal had some service that automated this!
A popular tactic of totalitarian governments is to pass laws which everyone will have to break. So that if they don’t like someone, there is always a lawful reason to take them down.
I don't have a good "end goal" answer for that right now. I do think that the technology that has popped up over the last few decades allows for means of organization and collaboration for providing life necessities that were not available for the vast majority of human history.
If I'm being idealistic, I think that a good bit of the historically useful functions of government ( on a more abstract level, historically useful functions of centralized authority )is made quite outdated by the availability of global communications and exchange to the "common man". It's a can of worms of a topic, and I don't really have the time to get into it right now, so I'll leave it at that.
If I'm being extremely idealistic, I think we should be in a state of post-scarcity in terms of shelter and food, and I think that the internet is a large part of the way that humanity will get to that point if it ever does. In the same vein, I lean towards thinking that getting to that state will become rather necessary for the continued growth and survival of our species, if we're going to continue to grow and survive.
What the hell is up with this thread? This has to be the worst thread I've ever seen at HN. You'd think this were a comment thread on Fox News or something.
People: Chill the fuck out. The IRS is accepting comments on the issue. The rule doesn't go into effect until, realistically, April of 2013. By then, it is almost guaranteed that the rule will be significantly weakened to the point where it is not much different than what we have in place now.
This isn't a world-ending or economy-destroying fuckup organized by big-governement Democrats. It was a short-sighted clause put in by a politician trying to close a loophole. This is why we have checks and balances- the executive branch, which is actually in charge of implementing these rules, will implement them in a sane way.
So put your conspiracy theories to bed and get on with life. File a comment with the IRS and wait a couple of years. Then maybe you'll see that this was just one big stink over nothing.
Realistically most new bill have a ton of shitty things in them that get fixed through other bills later on, it's always been like that and the small business lobby is fairly powerful so 2 years should be enough to kill this clause.
There was a discussion recently by a number of long-time accounts on how this seems to actually be coming to pass, and that the quality of submissions hitting the front page has clearly decreased. I can't say I disagree.
That said, I'm just as annoyed as the next guy at the inefficiency that the IRS seems to be trying to foist into the economy to help them raise revenues.
What is up is the inflammatory submission title and linked page got people all riled up. There is not really a good reason to be linking tax codes with the end of the world. I'd downvote the submission if I could.
"By then, it is almost guaranteed that the rule will be significantly weakened to the point where it is not much different than what we have in place now."
This is probably only true if people flip out over it now.
I am not so sure that is true. It is like saying, be polite to people in stores and restaurants and you are more likely to get what you want, but the fact is that you see pissed of people making a stink, and getting treated better for fear of pissing them off.
The IRS is accepting comments on the issue.
[..]
It was a short-sighted clause put in by a politician
trying to close a loophole.
It's not just one politician: a great many people have been over these documents. It seems none of them realized how insane this is. Or perhaps none of them could be bothered to do anything about it? Either way: means there's something seriously wrong right there. If enough sillyness makes it through to this level, at some point the sillyness will actually make it all the way through.
I just really want to know the reasoning behind this. What would make a person propose such a thing? What loophole were they thinking of closing? How could they not see what is so blatantly wrong with what they are proposing? I wonder, who is this person?
Even if it does go through exactly this way, very few people will comply with it, so the probability of getting singled out for serious retribution should be fairly low. So there's yet another reason to chill out.
The current rules for the filing date for the copy of the recipient's copy of the 1099 is Jan 31. The electronic filing deadline for the IRS's copy is Mar 31.
I don't like this at all but if you want to attempt to take a positive spin on it you could see that this would be a lucrative area for many startups to start offering services for handling these 1099's.
Cam here to make this comment. Wouldn't be too difficult to build a quick site that aggregates all your transactions, auto-generates appropriate 1099s and mails them to the company accounting addresses it has on file matching the transaction records.
Last year a customer accidentally double entered my invoice in their system, and paid me two checks instead of one. I contacted them to let them know of the discrepancy, and never cashed the second check. Their system was never corrected, and I got a 1099 showing I earned double the actual amount. I'm still trying to iron this mess out, and it's just one 1099.
The good news for you is that the uncashed second check will eventually show up as a discrepancy on their books and they will have to deal with it. It make take some time but it will happen.
The original invoice and uncashed check would substantiate his explanation of the error. I don't enjoy filling out forms etc., but somehow I manage to keep my tax paperwork and business receipts chronically organized in case I ever need to verify something.
So, is this going to be mitigated somehow, or will everyone just ignore the requirement, or will somebody launch Fresh1099s.com and make a pile of money to reduce my headaches considerably? Stay tuned . . .
I'd be curious to hear how many of the outraged people in this thread already deal with at least, say, 4-5 1099s (other than the obligatory one your bank sends you to report interest earned) in a year.
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My main point is that, contrary to the impression some people here seem to have, non-business expenses won't require 1099s. The discussion here (in particular the thread I was replying to) seemed to think that the law would require their grandmother to send Best Buy a 1099 if she spent more than $600 on her new computer, or that you'd have to add up all your Home Depot receipts to see if you spent more than $600 on home-improvement this year, which isn't the case.
And remember, if the numbers don't match you'll also need a tax lawyer, because you'll be getting audited. Off by more than 25%, have fun in prison. This is a major, onerous reporting process. If you have a $50/month service with 1000 clients, you're doing $600k. This will eat at leSt half of your gross.
Most small companies cant do it, but HN style companies can. Push fulfillment to Ireland, development anywhere. Let Ireland charge through the noose, and let the euros pile up in Switzerland.
If you open a company in another country, tax collection is under the jurisdiction of that country, not the US. I'm also not advocating no taxes, I just wish the Obama administration would think about the consequences of these types of decisions.
I'm also not trying to "pull that patriot crap". I'm just giving you the consequences of making it difficult for me to do business in the US. I will move my business elsewhere, which will also mean a loss of jobs for US workers. I know I'm not alone with this.
IIRC, most other "western" countries don't do that, but I could be wrong.
This is nothing more than a Federal jobs program at the expense of the private sector.
More likely it was an attempt to close a perceived tax loophole without understanding of the cost of compliance. I have no doubt it will get fixed before it actually goes into effect.
And that happens what, 8% of the time? Most online services are evading sales tax.
NYC has a weird list of services. http://www.nyc.gov/html/dof/html/business/business_tax_nys_s... The Texas list is more comprehensive, and includes web site creation http://www.window.state.tx.us/taxinfo/taxpubs/tx96_259.html
This is also an option that would be useful in creating a VAT, if the government has access to all of these transactions. Sadly, the states already tax most of this money and it would look bad to have Feds move in there. However, the gap in service taxes would appear to be an opportunity, especially in B2B taxes which would be invisible to most people.
Are cell phone companies going to issue 1099s to most of America, and all users have to do the same?
To make sure that retailers/sellers are accurately reporting their sales and not lowballing their revenue numbers on their tax returns. It's basically to reduce tax fraud with the hope that the extra tax income (which is assumed that corps or fraudulently not paying) can be used to pay for health care without having to add additional taxes.
Edit: Thanks for the down vote, but as a practical matter the IRS is going to use this as an audit trail. So a company needs to report revenue > the submitted 1099's. While they will get some 1099's their reported gross income is going to be dominated by people who don't need to send 1099's so it's going to have minimal impact. Note: There is zero new tax implications, it’s simply a reporting issue so being sent 1099’s DOES NOT IMPACT the taxes they pay.
The people receiving 1099's that are going to suffer are those who try and hide income. Companies are going to need to report revenue > 1099's or the IRS can easily find issue based on that discrepancy.
On the other hand Apple is going to need to send a lot of 1099's out to developers.
See also: http://www.amazon.com/Three-Felonies-Day-Target-Innocent/dp/...
Bottom line, a misguided attempt to improve income reporting and tax collection is going to be either watered down by the IRS or killed in congress. Maybe I'm a sad optimist, but to me it looks like democracy's still working well :-)
The health care bill was effectively implemented as a tax bill. The entire structure of the bill is a set of rules and initiatives set up to encourage businesses and individuals to get or provide health insurance through a series of tax raises and tax cuts.
The tax code is the mechanism through which this policy is implemented. I'd love to hear what other mechanism you'd prefer for implementing a health care plan. (And copping out by saying "it shouldn't have been implemented" isn't gonna fly)
If they were going to actually try to implement national health care it should be done as constitutional amendment.
Are you seriously going to argue that "Armies" doesn't include the Air Force?
An Amendment wasn't required to create the Air Force any more than it was required to create the DHS, or is required to create any other Federal agency. Congress has the power to create, destroy, and reorganize Federal agencies as it wants to. So in 1947, Congress created the Department of Defense as a Federal Department, which the Constitution allows them to do, and put the Army, Navy, and Air Force (new) under it. There wasn't anything even vaguely unconstitutional about it, even taking a really uncharitable reading.
Congress creates new Departments fairly regularly; there wasn't a need to go through the amendment process for the DoD any more than there was to create the Departments of State, Transportation, Energy, Labor, Education... etc. All it takes to create one is the same process to pass any other piece of legislation.
I would personally not be against requiring an amendment to create new agencies, just on the grounds of controlling governmental scope creep, but that's not the way things are set up. Congress has been creating Departments since the ink was barely dry on the Constitution itself.
I still don't understand your comparison to Obamacare. Are you asserting that the constitution would authorize Obamacare with some tweaks to heirerarchy? Please explain.
I don't see the changes as being remotely comparable in magnitude.
Unless you hear about Democrats getting behind repealing this, you can ignore Republican attempts to do so. (This may change after the midterm elections. Though the most probable outcome is to wind up with deadlock because nobody can break a filibuster.)
for a less dramatic look at things.
The IRS is accepting comments on this requirement at http://www.irs.gov/newsroom/article/0,,id=225029,00.html
Ostensible justification is likely along the lines that the IRS can already track credit & debit card purchases far more easily than purchase orders, checks and cash. Regardless, this would be a major boon for the credit card industry if it in fact goes forward as planned.
[0] http://www.washingtonpost.com/wp-dyn/content/article/2010/07... (near the end)
This has to be the most mind-numbingly stupid thing I have seen the government do in the last couple of decades -- and that includes bad wars, if that's your thing.
Why can it be so bad? Because it screws with every single economic entity in the nation, in a way that pervasive, subtle, and micro-managing.
If you want to know where "1984" is, with Big Brother watching all of your moves, it's not bullshit programs like TIA. It's making you rat out the guy who is on disability but mows lawns on the side, or the guy who paints houses at nights without reporting the income so he can send his kid to school. Or the mom that babysits kids so that she can stay home.
Yes. These people are law-breakers. In a web of such complexity that 80% of IRS's own employees can't answer sample tax questions, we are all law-breakers. But this takes tax collection to a new low -- now I am going to be responsible for "double-checking" on my neighbor who sold me those used lawn mowers last year. I need to do my part to make sure he's reporting everything.
It is so outrageously stupid and infuriating that I still can't believe it is true. I'm beside myself. So if I eat at Burger King during the week when I travel, about the 120th time I buy a burger, I need to chalk them up for a 1099.
It's the worst thing for small businesses and the underground economy that I've ever heard of the government doing. It just can't be true.
</rant>
ADD: And don't get me started with some bullshit about how the agency hasn't decided yet how to enforce it. This is like saying the Congress voted to install cameras in everybody's homes, but that might not be so bad because the administrative work hasn't been done to decide who exactly gets a camera and when. As if this somehow mitigates things.
Also, for all of you folks down-voting me. Tell me I am wrong. I'm not a tax professional and I don't read the political spin sites. The only reason I've commented now is that this is the 3rd or 4th time I've seen this posted on HN. So please. I would love to be wrong about this.
Also, you, as an individual, won't have to send 1099s to anyone, whether your baby-sitter or lawn-mower or Office Depot. Only businesses will, though this does include small businessmen and sole proprietorships (the way to distinguish a sole proprietor from "just a person" is by whether you're deducting those expenses as business expenses on a Schedule C or not).
Except in this case it's a horrible tyrranical oligarchy that instead of making your life hell gives you a few extra forms to fill out every week.
(Reiterating what madair already replied to sprout, but I felt his point was not as clear as it could be)
Even if that were not the case, it would hardly be a 1984 scenario, especially given that there are no criminal penalties for failing to file the 1099s. That's pretty absurdly embarrassing hyperbole that makes you sound like you came from DailyKos or something. The war on drugs is more of a 1984 scenario than requiring 1099s is, especially since it comes with widespread criminal penalties.
I think that's the key of it right there. The worst the IRS could do if you failed to file the 1099s is... force you to file the 1099s. The horror.
Don't get me wrong, I've been outraged by the practice of concealing unrelated bits of legislation inside various bills for years, but to say that this is worse than war is truly an exaggeration. Major annoyance, yes, but still quite a bit better than being shot.
On the other hand, this is a pretty big deal, and your reply doesn't justify it. Yes, not everyone "is" a business, but everyone relies on the economy every day. Adding a not insignificant overhead to the companies that bring you food, water, electricity, etc. makes those items more expensive. Also, increasing overhead in businesses makes it harder to start businesses, which is sort of relevant given that we're on YC news.
Seriously. Chill out. The thing hasn't even been finalized yet, and there'll be public comment periods and reviews and all sorts of other stuff providing people an opportunity to go froth at the mouth about how this will be the end of the world or whatever.
In the meantime: take a deep breath. Relax. Read and learn. Get as much information as you can instead of going off half-cocked. And actually think through the things you'd like to say, because hyperbolic rants don't do anyone a damn bit of good.
So now it's non CC company to company transactions > 600$/year which is a far smaller pool. The absolute worst possible case is total revenue / 600$ but the reality is most companies have a fairly small number of suppliers. So something like Ln (revenue / 1000) for the average small business.
Haven’t these been targeted by government regulation in the last couple years? I remember reading about police agencies wanting these banned (along with pre-paid cellphones) for enabling the drug trade.
The legislation has been "finalized". The regs aren't written, but the mandate is pretty clear, so they can't have much effect.
If you're a biz and you pay in certain ways, you will have to issue a lot more 1099s than you do now. Regs may change the number by 1-2%, but they won't affect the order of magnitude.
In this case the report was produced by the Hearland Institute which Wikipedia describes as "an American conservative public policy think tank based in Chicago, Illinois that advocates free market policies."
Based on some of the bullshit they have published when it comes to global warming, they seem to be more interested in pursuing a political agenda than sticking to the facts.
"Most scientists do not believe human activities threaten to disrupt the Earth's climate."
"The most reliable temperature data show no global warming trend."
"A modest amount of global warming, should it occur, would be beneficial to the natural world and to human civilization."
"The best strategy to pursue is one of 'no regrets'."
Here's a guy who actually quotes the law in question, and since the health care bill manifests as a patch to the original law, also expands out the 1099 law to what it now says: http://thefinancebuff.com/2010/05/1099-filing-requirement-in...
I have no idea what his political affiliation is, I just linked for the law quote.
Or do I not have to worry about this law, because the Heartland Institute are global warming heretics?
http://money.cnn.com/2010/07/09/smallbusiness/irs_1099_flood...
Also, as a consumer of goods and services, now I need to do a 1099 for Amazon, people I hire for small bits of work, the local electronics store, etc.?
The only difference with the new rule is that you'd have to give 1099s to vendors.
If I'm being idealistic, I think that a good bit of the historically useful functions of government ( on a more abstract level, historically useful functions of centralized authority )is made quite outdated by the availability of global communications and exchange to the "common man". It's a can of worms of a topic, and I don't really have the time to get into it right now, so I'll leave it at that.
If I'm being extremely idealistic, I think we should be in a state of post-scarcity in terms of shelter and food, and I think that the internet is a large part of the way that humanity will get to that point if it ever does. In the same vein, I lean towards thinking that getting to that state will become rather necessary for the continued growth and survival of our species, if we're going to continue to grow and survive.
But yeah, can o' worms.
People: Chill the fuck out. The IRS is accepting comments on the issue. The rule doesn't go into effect until, realistically, April of 2013. By then, it is almost guaranteed that the rule will be significantly weakened to the point where it is not much different than what we have in place now.
This isn't a world-ending or economy-destroying fuckup organized by big-governement Democrats. It was a short-sighted clause put in by a politician trying to close a loophole. This is why we have checks and balances- the executive branch, which is actually in charge of implementing these rules, will implement them in a sane way.
So put your conspiracy theories to bed and get on with life. File a comment with the IRS and wait a couple of years. Then maybe you'll see that this was just one big stink over nothing.
"If your account is less than a year old, please don't submit comments saying that HN is turning into Reddit. (It's a common semi-noob illusion.)"
[1] http://ycombinator.com/newsguidelines.html
That said, I'm just as annoyed as the next guy at the inefficiency that the IRS seems to be trying to foist into the economy to help them raise revenues.
This is probably only true if people flip out over it now.
I don't think the IRS is reading angry internet forums.
This law is just noodling. They're just fishing around for new income ideas, throwing spaghetti at the wall, and seeing what sticks.
Don't freak out.
We wish it was true, but it ain't.