Last week, I mentioned a couple of proposals made by the Bush Administration to close that bothersome $353B tax gap.Â Most of those proposals regretably would negatively impact small business owners.Â Here’s another one of those bright ideas put forth:
Currently, if you pay an indepedent contractor $600 or more for services annually, you are required to send that individual a Form 1099.Â Traditionally, as a business owner, youâve relied on using whatever taxpayer identification number that they provide to you.Â However, underÂ a new proposal, you would have to verify that contractorâs TIN with the IRS.Â If the IRS canât verify the number, then the business would have to withhold taxes on payments made to the contractor.
If this legislation passed, you would then have to potentially add the responsibility of tax collector to your list of âthings to do and beâ? as a small business owner. If you frequently use independent contractors, do you believe you would have the time to hunt down and report this type of information to the IRS?Â
Â Brilliant idea or another case of what were they thinking?