The IRS has got a problem. All right, we know it has several problems, but this one could potentially become yours. The IRS is experiencing a $353 billion tax gap, which is the difference between what the taxpayers should pay and what they actually pay. To address that gap, the Bush administration has put forth a few proposals aimed directly at the self-employee business owner.
One of those more annoying proposals would generate additional paperwork for business owners. Under this particular proposal, reporting payments using Form 1099 would change drastically. Currently, businesses only use Form 1099 for reporting payments to sole propriertors. But under this new tax gap proposal, businesses that purchase more than $600 in services annually from a corporation would be required to report the payments to the IRS using Form 1099.
What does that mean for you? Do you pay FedEx $600 or more a year in delivery or shipping charges? If so, you’ll have to send them a 1099 at the end of the year. Do you order more than $600 in office supplies from a corporation? Guess you’ll be filling out another one. Any purchases to a corporation totaling more than $600 a year would now have to be reported to Uncle Sam.
Yet, another great example of bureacracy at its best. I think we can do without yet another regulatory burden designed to force small business owners to waste time and money on yet another useless governmental requirement.