I am back stateside for awhile tidying up some loose ends, selling a house, and making a few business deals. Since I’ve been back, I keep getting the question from friends and family, “how does it feel to be back in the US?” I’m not really sure how to answer this without hurting someone’s feelings, as the majority of most Americans still believe the hype of America the great. My brother asked me directly if I was actually glad to be back.
Well the short answer is, yes and no. While I do enjoy the time with friends and family, as well as eating barbeque and fried chicken, I am counting the days until my next long term US departure. Living abroad opens your eyes to the realities of the world. Regardless of what most Americans think, the US is not the only nice place to live.
And to be honest, I am already getting fed up with the complications of being in the US again. Which leads me to today’s topic; the hidden tax change in the health care reform bill.
Many of you may already be aware of the new regulations with regards to filing 1099’s. But are you really aware of the consequences?
For those that are not aware of the new reporting requirements, in section 9006 of the 2400 page health care bill, it mandates that beginning in 2012 all companies will have to issue 1099’s to ANY individual or company where they spend more than $600. This includes contract workers, services, or goods.
Now imagine you decide to take a few clients out for dinner one night to Joe’s Steakhouse. Your bill totals $650. You now must collect tax payer information from the restaurant and issue them a 1099 at the end of the year.
On your next business trip for a trade show in Las Vegas, you will need to issue a 1099 to the airline, the hotel, restaurants, and any other business where you spent $600.
This puts a burden not only on you, but also on the ones receiving the 1099’s. And your business will also need to receive 1099’s from each of your customers who spend $600 or more thus increasing the administrative cost for everyone involved.
Of course, what happens when businesses incur additional costs? You guessed it! Prices go up. As the cost of doing business increase, so must consumer prices.
However in many cases, prices will not be allowed in increase thus putting a heavy burden on the business owner and reducing his profits. Of course, he is the evil capitalist; he can afford it….right?
For many small businesses, this may be the straw the broke the camel’s back. Why continue to jump through so many hoops to maintain compliance, only to be taxed nearly 50% of your income and take consider risks? I think many small business owners will hang up their hat.
Of course I may be skeptical, and certainly a bit jaded, but regardless, this regulation can have no positive effect on economic productivity. This is merely a tax grab by the IRS to make sure they get their fair share. In reality, I think it just creates a good excuse to exclude deductions at your next tax audit giving the IRS agent a reason to hit you with additional taxes and penalties.
Now currently there is talk of repealing this legislation, but the fact is it made into the health care reform bill unnoticed. This is the nature of our policymakers. They slide in things like this unnoticed in a 2400 page bill that no one actually reads in an effort to grab more of the wealth of the productive citizens. Even if it gets repealed, the idea prevails as does the notion that things like this can get passed without batting an eye.
It sure would be nice to run a business outside of the reach of the US tax department…..
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