Restaurateurs ask Congress to Repeal New Paperwork Mandate

A new information-reporting requirement for businesses included in the health care reform bill, but not related to health care, would force businesses to file an IRS Form1099 for all payments they make of more than $600 a year to providers of property and services. This includes corporations that provide property and services. Congress included the reporting measure in the health care bill as a revenue-raiser to offset the bill’s costs.

Eliminate the Expanded 1099 Information Reporting Requirement in the Health Care Bill

The bottom line is that beginning in 2012, all purchases of goods and services in aggregate of $600 or more in a year must be reported whether purchased from a corporate or non-corporate entity. Payment with a credit or debit card will be exempted from these expanded requirements because the IRS will require reporting of those purchases by your bank and payment processor.

In practice this means restaurants will have to track their purchasing by amount, vendor and method, and then issue the appropriate reporting forms to the IRS and suppliers. In addition, obtaining taxpayer identification numbers (TINs) is necessary before a purchase and will be an increased paperwork burden for all restaurants. It may also require backup withholding by the payer (e.g. restaurant) when a payee’s (e.g. supplier’s) TIN is unknown or missing.

Nearly 40 million businesses and other entities will be subject to the new, far-reaching reporting requirements. The National Taxpayer Advocate within the IRS submitted a report to Congress last week expressing concern about the "significant compliance burden" this provision could cause for businesses and others.

That’s why the National Restaurant Association is working to stop the implementation of this requirement through legislative and regulatory efforts. We support all efforts to eliminate this expanded 1099 information reporting requirement.

Eliminating the expanded 1099 information reporting requirement has broad bipartisan support.

Sen. Mike Johanns (R-Neb.) and Rep. Dan Lungren (R-Calif.) have introduced bills — the Small Business Paperwork Mandate Elimination Act — to repeal this part of the health care bill. The National Restaurant Association has joined other business groups in supporting S. 3578 and H.R. 5141.

Another bill, H.R. 5982, the Small Business Tax Relief Act of 2010, was introduced by Rep. Scott Murphy (D-NY) however the House failed to pass the measure on July 30 due to objections to other provisions in the bill. In a letter to Majority Leader Steny Hoyer (D-MD), Congressman Murphy recently requested that his bill be reconsidered on the floor when the House returns in September.

The Senate also intends to consider repeal of the expanded 1099 provision when they return from August recess. Before departing in early August, Majority Leader Reid (D-NV) made the necessary procedural motions for consideration of the issue through several amendments to the Small Business Jobs Act of 2010. There are three amendments that are anticipated to receive consideration on September 14th: Senator Johanns’ amendment that would repeal the expanded reporting, Senator Bill Nelson’s (D-FL) amendment and another by Senators Max Baucus (D-MT) and Mary Landrieu (D-LA) both would repeal the information reporting requirements for all businesses with less than 25 employees and would increase the threshold for reporting from $600 to $5,000.

How can you help?

Your members of Congress will be in their home districts and states until Congress goes back into session in September. This means there will likely be multiple opportunities for constituents to engage them on the issues. We encourage you to attend town hall meetings and other events and ask your elected officials to eliminate the expanded 1099 information reporting provision when they return to Washington in September.

Here are some talking points to help you in your conversations:

§ The expanded information reporting requirement will increase the paperwork burden for all restaurants. Tax paperwork and compliance are already major expenses for restaurants that operate on thin profit margins, and the expanded reporting requirement only will increase those costs.

§ A Small Business Administration study indicates that the cost of complying with the tax code for small businesses is 66 percent higher than for large businesses. Since this reporting requirement makes almost every business-to-business transaction potentially reportable to the IRS, small businesses will be greatly impacted because the cost of complying will be significant.

§ Seven out of ten eating-and-drinking places are single-unit operators. These small businesses will be most impacted by the expanded information reporting requirement.

§ The expanded information reporting provision will have broad impact. The National Taxpayer Advocate submitted a report to Congress recently expressing concern about the “significant compliance burden” this provision could cause for businesses and others. The report estimates that nearly 40 million businesses and other entities will be subject to the new, far-reaching reporting requirements including: 26 million non-farm sole proprietorships, 4 million S corporations, 2 million C corporations, 3 million partnerships, 2 million farming businesses, 1 million charities and other tax-exempt organizations, and more than 100,000 government entities.

§ Information reporting requires a payer to obtain a taxpayer identification number (TIN) from the payee before a transaction is executed; otherwise backup withholding tax may need to be applied by the payor. This will drastically increase the paperwork burden and potential backup withholding liability on all businesses because so many more transactions will be subject to reporting.

§ All restaurants will have to track purchases every calendar year by amount, vendor and type of transaction (credit/debit or otherwise) for the purposes of this requirement. This will pose great difficulty for restaurants that can have many vendors over the course of a year.

§ Although the IRS has indicated they will not require the duplicative reporting of credit and debit card purchases, this does not necessarily lessen the burden for restaurants. The use of credit and debit cards is not free for merchants who must pay high transaction fees and make purchases by credit or debit card that much more expensive.

For further information, visit: http://bipac.net/issue_alert.asp?g=nra&issue=1099&parent=NRA