Call for Repeal of 1099 Tax Reporting Rule by Leading Democrat

New rule from health reform law 'suffocates' small businesses in red tape

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Rep. Nydia Velazquez, D-N.Y., ranking member on the House Committee on Small Business, is calling for repeal of a new tax reporting rule enacted as part of health care reform called “1099 reporting,” which requires businesses to report nearly all expenses exceeding $600 to the IRS.

During the last Congress, Velazquez explained, the House twice voted on legislation that would repeal the new 1099 requirements, but the measures were blocked by Republicans. Velázquez, who voted both times for repeal, said she would continue working to alleviate small firms’ tax compliance obligations. In early February, the Senate approved an amendment that would repeal the new reporting requirement. Velazquez says that the White House has also suggested that it supports repealing the 1099 changes.

“At a time when our nation's small businesses need to be powering our recovery forward with new jobs, we shouldn’t be suffocating them in the red tape of additional tax regulations,” said Velázquez, in a statement. “These new tax procedures were meant to level the playing field and close the tax gap, but the outcome will be to bury small businesses in paperwork.”

During a hearing held by the House Committee on Small Business on Feb. 9, entrepreneurs testified that these new 1099 reporting changes would be costly and time consuming. While the new reporting requirements are not effective until 2012, small businesses testified that they are already taking on significant expense in preparation for the new rules--hiring accountants, purchasing software and changing business practices to be ready for the new 1099 requirements.

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