By Jay Heflin - 07/29/10 08:20 PM EDT
Beginning in 2012, small companies will be required to file one form for each business and individual it pays for goods or services that cost more than the aforementioned amount.
The mandate was part of the recently enacted health reform bill to help offset the legislation's $1 trillion cost.
Small business advocates have blasted the measure, saying it will overburden business owners.
"This expanded 1099 reporting mandate has really gotten under the skin of small business owners, and rightly so," said Small Business & Entrepreneurship Council president and CEO Karen Kerrigan in prepared remarks. "The burden of the new mandate will be tedious, time-consuming, and costly. Business owners across the country are furious that Congress slid the measure in a massive health care bill without understanding its deep impact."
House Republicans claim the mandate's expense will take money away from businesses that otherwise could have been used to hire additional workers or retain existing ones.
The mandate was added to the health care bill to ensure small business tax compliance.
But a recent report from the National Taxpayer Advocate stated the mandate "may turn out to be disproportionate as compared with any resulting improvement in tax compliance."
"In our view, it is highly likely that the IRS will improperly assess penalties that it must abate later, after great expenditure or taxpayer and IRS time and effort," the report stated.
The National Federation of Independent Business claimed the mandate will have a "direct negative impact on small businesses."
The American Institute of Certified Public Accountants warned Congress earlier this week that the mandate "will significantly contribute to the hurdles to growth."
The Republican proposal to repeal with mandate is paid for by reining in subsidy overpayments related to the new healthcare law. The offset would better ensure individuals taking part in the insurance exchange are eligible for the subsidies claimed on their tax forms.