Mandatory 1099 Insanity

Buried in the 2000+ page Health Care Bill (or lack thereof, frankly), that no one in Washington bothered to read, is a provision that will change the face of business in America. That is not too strong a statement. The actual language is fairly minimal, merely adding corporations to recipients required to get 1099'd for revenue paid to them by businesses, and then adding a provision that it applies to ALL payments, products AND services. Effective 2012!

This one you have to stop and think about. So for a business, and remember that 95% of business in the US is small business, EVERY dollar of payment will be reported either on a payroll form, or a 1099. Every expenditure at Office Depot, or Home Depot, WalMart, UPS...ALL vendor payments. This is amazing in its scope. Literal forests will be chain-sawed to the ground to create the paper that will then be semi-trucked to WalMart headquarters. Unemployment will cease, since accountants will now have to engage bookkeepers to do the detailed accounting work for each client, or the client will have to hire one, the WalMarts will have to create whole new departments to receive the truckloads of 1099's and then do something with them, the trucking industry will grow, and fuel for the trucks will be used in record amounts! I wish I was making this all up.

And...every small business will have increased accounting or bookkeeping costs as a consequence, since EVERY vendor will have to have a detailed profile, a FEIN on file, and every transaction recorded in detail. Basically, Quickbooks will be required for even the very smallest businesses, because when errors and disptues come up, it will be necessary to substantiate where your reported numbers came from. This is hard work, something that I've managed to avoid in the 25 years that I've been in business, since the 1099 reporting was directed to unincorporated businesses providing services only. Which might be about 10% of the expenditures for many companies. Now, every business will have to conduct its accounting just like a large company. No options.

Note that while the business community will be buried under paper and reporting requirements that they will NOT be able to handle or pay for, the IRS will not be affected at all. Why? Because all this reporting will be done electronically and pushed into a computer somewhere. No human work at all. They'll be completely insulated from this insanity. Nice, huh? (I do wonder if even the IRS computers are capable of handling this increased reporting, tho'. It will be overwhelming even to them.)

Now, let me explain the ramifications, as if what you've read isn't bad enough already.

The IRS will now have EVERY transaction of EVERY business that's not retail. Every business to business transaction will be reported. So the IRS will now know every dollar of income unless you're in retail, and every dollar of expense. Getting a little spooked yet? And they'll be able to match all that with your tax returns. You want to claim an expense? Better have issued a 1099 for it, or disallowed! You trying to trim a bit off your income? Whoops. They know what you got paid now, so no cheating. And, in my mind, they can pretty well eliminate the audit staff since the computer can simply send out bills for the mismatches.

This one needs to die now, but sad to say, I can see that this will come one day anyway. Are we ready for this level of intrusion?