By: Subrina Wood, CPA, Manager
On April 14th, President Obama signed a bill repealing the expanded tax-compliance mandate in last year's health care law, the Patient Protection and Affordable Care Act, giving business groups and the association community that led the campaign against the requirement a hard fought victory.
The provision was presented as an offset to some of the expenses of providing universal healthcare. But Congress has wanted to amend the 1099 reporting requirement for some time to decrease the tax gap created by underreporting of business income. Under the provision businesses would have had to report transactions totaling at least $600 in a year paid to all business for goods and services starting January 2012. The repeal law returns such information reporting to its previous state, in which businesses must report only payments to unincorporated businesses for services.
Failed repeal attempts prior to the successful passage of HR 4 were introduced by Rep. Dan Lungren (R-CA) and Sen. Mike Johannes (R-NE) as well as a Democratic version by Sen. Bill Nelson (D-FL), underscored the complexities involved with trying to present a revenue neutral bill of the administration, which would not suspend critical health initiatives for individuals or create an administrative nightmare for corporations and small businesses. The final bill covers the $21.9 billon the provision was estimated to raise with changes in the portion of the health care law that deal with the health insurance tax credit that low and middle income Americans will get. Recipients of federal insurance subsidies under the health system reform law will pay back more of those subsidies if it is determined that the recipient received higher income for the year than projected.
Rental Real Estate Provision Also Repealed
The bill President Obama signed also repeals a separate tax reporting requirement that was passed in the Small Business Jobs Act of 2010. That rule, which took effect January 1, required more landlords to report more information about their business expenses. This requirement has also been returned to its' previous state requiring only landlords whose rental activities qualified as a business to file 1099 with the IRS.
Subrina Wood is a manager in Tate & Tryon’s Tax Department and can be reached at email@example.com.