Small biz applauds 1099 repeal

New York entrepreneurs are breathing a collective sigh of relief after President Barack Obama’s last week signed a bill to repeal a provision of the federal health care reform law. It would have required small business and real estate owners to file 1099 forms with the government for purchases of $600 or more.

“It’s very helpful,” said David Vinjamuri, president of ThirdWay Inc., a marketing training company in Manhattan. “My business outsources many functions to freelancers. It’s a hassle every year. Not having to track smaller payments and report them relieves me of extra paperwork.”

Mr. Obama on April 14 signed H.R. 4, repealing the provision of the Patient Protection and Affordable Care Act. The law was scheduled to take effect in January 2012.

Jon Zefi, a principal based in the New York office of tax and financial advisory firm EisnerAmper LLP, said the goal was to remove the tax compliance burden from the reporting requirement on small businesses.

“This is the first significant revocation of the health care reform act,” he said. “It would have required every small business and real estate business owner to file a 1099 to the IRS for every vendor to whom they paid more than $600 a year. That’s a relatively low threshold.”

Many clients were upset over the short implementation time, Mr. Zefi said. “They were calling frequently, wondering when they would have to be compliant with it, when it will take effect.”

Nancy Ploeger, president of the Manhattan Chamber of Commerce, said some members wondered why the provision was inserted into the health care bill at all.

“The fact that it was buried in the health care bill was bizarre enough, and then it was yet another burden on the backs of business owners, more paperwork,” she said.

“Also, what is the point of it?” she asked. “You issue a 1099 to an outside contractor, which is understood because the government wants to keep track of the income of outside contractors. But any major corporation you’re making purchases from already has a reporting requirement.”

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