Senate Finance Committee Chairman Max Baucus, D-Mont., said Friday he would introduce legislation to repeal the controversial requirements for businesses to file forms that would report payments made for goods and certain services to the IRS.
The proposal was originally written to keep taxes low by giving the IRS more tools to ensure all owed taxes were paid. However, following passage of the law, some business owners expressed concern that when the provision does go into effect, the forms would place too large of a paperwork burden on businesses struggling in a still-recovering economy. In response to those concerns, Baucus said today that he would repeal the new reporting requirements and look for other ways to improve tax compliance and keep taxes low.
“I have heard small businesses loud and clear and I am responding to their concerns,” Baucus said in a statement.
This type of reporting, which uses Form 1099 to indicate how much money businesses pay to corporations, was an idea proposed by the Bush administration to help better keep track of what businesses spend and earn, which in turn helps better keep track of tax liability.
The Treasury Department estimates that more than $345 billion in owed taxes go unpaid each year.
As chairman of the Finance Committee, Baucus worked together with the Bush administration to begin crafting the policy, in the hope that more unpaid taxes could be collected. However, after the policy was finalized late last year and became law in early 2010 with the passage of the health care reform bill, more business owners became aware of the new paperwork requirements and raised concerns about the resources required in January 2012 to complete the forms, when the policy was set to go into effect.
The provisions would have required them to report all purchases of goods and services over $600 from the same vendor in a calendar year.
Baucus’s actions to repeal the reporting requirements Friday come after recent consultations with small business owners in Montana and across the country.
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