Controversy: Sneaky New Tax Form, Burden for Businesses

Tax breaks/write-offs are a major incentive for owning a business. Well, a pesky new tax form (mandated by health care reform) will change the way we plan for tax season – another burden for small business owners. Read on for more info…
In the 1,000+ page health care reform bill, a new tax form burden
completely unrelated to health care was snuck in unnoticed by
the IRS. The full ramifications of this previously unnoticed
paragraph is just coming to light in the past few days.
Here’s the deal.
The provision has to do with the 1099 forms that all businesses
are required to file regarding payments over $600 to freelancers
and contractors for personal services rendered.
This rule applies to sole proprietor businesses and excluded
The paragraph basically changes the definition from “personal
services rendered” to “all services and goods” rendered from
“all organizations” (including corporations)
Basically, this means anytime your company spends more than $600
with ANY other business, you will be required to file a 1099
form. The thinking is that by doing this your suppliers will be
forced to report all of their income.
Unfortunately, the cost of this enforcement will be funded by
you and me. Here’s why.
It’s kind of a hassle to get a W-9 form from a freelancer to
request their Tax ID number. But most businesses, only have a
small handful of these, so it’s annoying but not the end of the
Now we have to do the same for every company where we spend more
than $600.
For example, I spend several thousand dollars a year with hotel
chains like Marriott and Hilton. Now I need my bookkeeper to
contact their CFO’s office to request their Tax ID.
But wait, it gets better…
If I recall correctly, each Marriott location is independently
owned and operated. This means that for EACH Marriott location
I’ve stayed in for say more than 4 nights (where my bill would
often be over $600), I need to have my bookkeeper contact their
financial office and have each location send back a form with
their Tax ID on it.
The same goes for the telephone company, Office Depot, Amazon,
my web host, all of my favorite restaurants where I host
business lunches or dinners, the airport shuttle service, the
printer, Apple, Dell, AT&T, the merchant account, Hertz, the
attorney, the payroll service, the domain registrar, and more.
It’s hard enough calling their customer service line to give
them money, now I have to have someone call them to get a IRS
tax form filled out?
I seriously doubt Marriott, AT&T or Hertz is under reporting the
income they make from me — but now I’ll need to take on the
burden of a few thousand dollars in expense to go chase
These are dollars that could have been spent with suppliers
(helping them create jobs), or paying new or existing members of
my staff (boosting their household incomes… and spending in
their local economy), or to invest in marketing to get more new
business (which in turn allows me to spend more with my
suppliers and staff).
I have gone on record repeatedly to encourage clients and
readers that the economy remains highly uncertain. The long term
debt problem in the US in particular has not been resolved by
the “recovery”.
There are many unforeseen consequences that remain.
This is one of them.
And if by some small miracle enough people complain about the
useless paperwork requirements before it takes effect in 2012,
then I’m certain there will be another unforeseen consequence to
take its place.
While I know many of you feel that the business environment has
become hostile to businesses both economically and politically,
I actually do think it’s a mistake to let these external changes
get you riled up emotionally.
Are these kinds of headaches a problem? Yes, absolutely.
Is it worth more than a passing moment of your time and focus?
Definitely not.
Is it excuse for delivering sub-par financial performance this
year? Heck no. That’s a total cop out.
Good leaders deliver the numbers no matter what.
And keep in mind that your competitors face these paperwork
burdens as much as you do. So while these kinds of these are a
total pain, at least they are equally painful to everyone.
So take small mental note of these recent events, and continue
to stay focused on your customers, your company, and your
competitors — and generally in that order — and you’ll do fine.
To Your Profits,
-Victor Cheng
Amercia’s Business Coach(r)
Victor Cheng is revenue growth adviser to owners of professional services and online business within $1 million – $25 million in sales.
As a former McKinsey consultant and the author of four books, he has
been featured as an expert commentator by Fox, Time magazine,
Inc magazine, Fortune Small Business, and The Wall Street Journal.
He publishes an email newsletter on revenue growth for
owners of high growth business.
To subscribe to Victor Cheng’s E-Letter please visit:

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