Share your feedback on proposed IRS reporting requirements

One provision of the new healthcare reform legislation may significantly influence the administrative burdens of your business unless the IRS interprets it in a way that recognizes the challenges of small business. As of now, the legislation states that, beginning in 2012, if you pay any person or corporation more than $600 in a year for goods or services with cash or a check, you must report that to both the IRS and the entity or person whom you paid with a 1099 form. 

In the past this only applied to services from unincorporated individuals or enterprises. But under this new provision, for example, if you bought $600 worth of toner cartridges from a big box store with cash or credit, you would have to issue a 1099 to the company from which you made the purchase (and if you were on the receiving end, you would need to report the 1099 transactions separately from gross revenues, presumably).

The IRS seems to be developing an exemption for credit and debit card transactions, although it has not yet been finalized.

The good news is that the IRS has asked for comments from the public. Please copy and paste the sample letter below, edit it as you choose (adding the strength of your reaction or personal examples, though in civil terms) and email it to notice.comments@irscounsel.treas.gov. Please be sure that the subject line of your email references Notice 2010-51and note that your email must be sent by September 29, 2010.

We understand the government's desire to track cash transactions, but the current system would impose an unacceptable record-keeping and reporting burden on small businesses like yours.

Don't hesitate to copy your Senators and Congressperson, with a little "Save small business! Help us!" note or something similar.

Thank you for your support (and your membership in AIGA).

Sample email to send to the IRS:

To: notice.comments@irscounsel.treas.gov 

Subject: Notice 2010-51

I am a creative professional operating in a small business environment. We believe there are approximately 140,000 other designers operating as small businesses or within small studios in the United States.

Notice 2010-51 reports amendments to Section 6041 that would increase the record-keeping and reporting responsibilities of my business beyond our current capacity and would increase our costs as a small business. To this extent, we believe this would be a burden that outweighs the revenue potential of the action, would stifle growth in this sector in these economic times, and would impose an inequitable burden on small business.

The two elements of the amendment that are onerous are the need to report purchases of "property," (which would appear to include all goods), and the extension of the reporting requirements to purchases from incorporated entities.

The proposed exemption for credit and debit card transactions was a great step toward reducing the impact of this change in the tax code. Unfortunately, it does not go far enough.

Every small studio makes regular purchases of supplies, printing, paper and equipment in excess of $600 and may often pay by cash or check. If all purchases are made by credit cards to avoid the reporting requirements, it can reduce the credit available for typical working capital requirements of small businesses.

We respectfully recommend that you take steps that will not diminish the vital role that small business plays in generating economic activity, productive employment and innovation by proposing rules that:

• Set the threshold reporting level at $5,000

• Exempt reporting requirements for small businesses with 25 or fewer employees

• Establish the exemption for credit and debit cards

• Limit the requirement to staffing expenses

Thank you for considering our position. Adopting of any of our recommendations, if not all, would reduce the burden.

Sincerely,
[your name, contact info and address]