COLUMN: IRS seeking stooges

By using these stooges, the IRS hopes to bring in additional funds to pay for health care reform.

By now, everyone knows that Obamacare is jut chocked full of happy little surprises including a much discussed provision which requires businesses to file Internal Revenue Service reports on expenditures above $600 to any single vendor.

House minority leader John Boehner drew fire recently for referring to the provision as “the new health care law’s job-killing 1099 mandate.” Boehner said the measure would cost businesses $17 billion to track and file the expenditures and cost the government another $10 billion to monitor compliance.

It sounds nuts, but the current administration actually thinks this plan is a good idea.

Supporters of the “rat tax” claim the measure will collect revenues from businesses who have traditionally under-reported their earnings.

Previously, businesses only had to file a 1099 when paying more than $600 for services obtained from any single business during a calendar year.

A provision in section 9006 of the Patient Protection and Affordable Care Act amends the Internal Revenue Code to include goods in addition to services.

How big a deal is this? Pretty big.

National Taxpayer Advocate Nina E. Olson recently released a report to Congress that expressed concern about the new reporting burdens facing small businesses.

“Beginning in 2012, all businesses, tax exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year,” Olson wrote.

According to an analysis of 2009 data, the reporting requirements will affect 40 million businesses and other entities including approximately 26 million non-farm sole proprietorships, four million S corporations, two million C corporations, three million partnerships, two million farming businesses, one million charities and other tax-exempt organizations and more than 100,000 government entities.

In the report, Olson opines that the burdens “may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”

You think? After all, the IRS is only asking that small businesses, farmers and other sole proprietors obtain a tax identification number from every vendor with whom they conduct business, keep track of all expenditures made to any one particular vendor and report said expenditures to the IRS every year. How much work could that take?

Sure, the vendor might refuse to provide a tax identification number at which point the business is supposed to withhold taxes at a rate of 28 percent. And yes, the requirement may necessitate additional accounting expenses or e-filing fees, but that is just a minor inconvenience compared to the real threat from this measure. Once this provision is implemented, the IRS will have even more data to use as a basis for assessing additional taxes and penalties thanks to an army of unwitting stooges – all in the name of affordable health care for all.

Republicans are calling for the repeal of the measure and even some Democrats think the “rat tax” may be a bad idea.

Democratic congressman Dennis Kucinich said, “This obviously was something that needed to be better thought out.” A bit of an understatement, but very true.

This expansion of the IRS’ reach imposes an unnecessary burden on small businesses and will only cause more harm to an already struggling economy. Instead of enlisting stooges to force compliance, the IRS should focus on assisting taxpayers in meeting the requirements of an already onerous tax code.

Kristi Reed is a reporter for the Barrow Journal. She can be reached at kreed@barrowjournal.com.