Representatives and senators return to work today facing a lot of pending tax legislation and not much time to pass any of it.
Most attention is on the expiring Bush tax cuts. But before anything is decided -- on whose tax rates get increased or stay the same in 2011 -- Congress is likely to deal first with some tax laws everyone can agree on.
One of those is a business tax that hasn't even started affecting folks yet. But as soon as it was enacted, companies started working to get it repealed.
It's a provision in the health care reform law requiring businesses, beginning in 2012, to file a Form 1099 for most purchases from vendors when the total is $600 or more.
Even if you're not a business, you're probably familiar with some version of Form 1099. It has many variations, but all are designed for one thing: to make sure the Internal Revenue Service knows about taxable transactions.
Lawmakers believe that without such third-party tracking, vendors might be tempted not to report, and pay taxes on, such relatively small amounts.
But with evidence via a Form 1099, the Treasury expects to collect much more of the estimated $345 billion that it estimates goes unreported each year.
Additional corporate 1099 reporting is not a new idea. It was floated by the Bush administration. And few are disputing that sending companies and the IRS verification of more financial transactions would pay off in more tax revenue.
Opponents of the new rule, however, believe that this system is too burdensome for small businesses.
For the last few months, Congress has attempted to repeal or change the law. Some proposals have called for increasing the threshold amount to help exempt companies that make smaller purchases. The Senate even tried a couple of times before the midterm election to repeal the law, but got caught up in procedural and political traps.
Now, though, the Senate's top tax writer says he's fully behind repeal of the law and will work to get that done in this lame duck session.
"I have heard small businesses loud and clear and I am responding to their concerns," said Max Baucus, D-Mont., chair of the Senate Finance Committee, in a statement announcing that he will today introduce a bill to repeal the 1099 reporting law. "Small businesses are the backbone of our economy in my home state of Montana and across the country, and they need to focus their efforts on creating good-paying jobs, not filing paperwork."
What about all that money that's not being taxed? Baucus says he and his colleagues will just have to look for other ways to improve tax compliance. That search should be interesting.
Are you a business owner? Were you worried about this reporting rule?
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