The House Ways and Means Committee began markup work Thursday on two bills aimed at repealing the expanded 1099 information reporting requirements in the health care reform law and the Small Business Jobs Act.
The tax-writing committee considered two different bills, H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011, and H.R. 705, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, after holding a hearing last week (see House Considers 1099 Repeal).
The Senate approved a repeal amendment earlier this month as part of a larger bill modernizing and reauthorizing the Federal Aviation Administration (see Senate Passes 1099 Repeal Amendment), but is still debating the larger bill. Senate Majority Leader Harry Reid, D-Nev., hopes to complete work on the FAA bill this week.
The House is expected to pass a repeal of the controversial provision in the health care bill, which requires companies to report on any purchases of goods or services of over $600 a year from another business. The Small Business Paperwork Mandate Elimination Act, introduced by Rep. Dan Lungren, R-Calif., has attracted bipartisan support from 270 co-sponsors.
The second bill, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, would repeal the same 1099 requirements as the Lungren bill, as well as repeal an additional Form 1099 information reporting requirement on owners of rental real estate that was added by last year’s Small Business Jobs Act. It would also add an offset that would reduce improper overpayments of exchange subsidies established under the new health care law.
House Ways and Means Committee Chairman Dave Camp, R-Mich., praised the two bills. “In my judgment, this is a win-win-win for taxpayers,” he said in a statement. “It is a win for small businesses who won’t suffer under new 1099 reporting requirements, it is a win for individuals and families who may rent out property and could have faced a mountain of confusing paperwork, and it is a win for the taxpayers who were being asked to simply look the other way and allow tens of billions of their hard-earned dollars to be erroneously, wastefully and, in some cases, fraudulently handed out by the IRS when the new health care subsidies start in 2014."
The committee plans to first work on H.R. 4, and after completing its work, immediately consider H.R. 705, to repeal the additional 1099 reporting requirements for owners of certain rental properties.
“The new provision generally treats the recipient of rental income from real estate as engaging in the trade or business of renting property,” said Camp. “This is the first time that Form 1099 requirements have ever been imposed on taxpayers who are not engaged in business activity. Individuals and families that rent real property – a vacation home, a condo, or even a spare bedroom – for even just a few weeks or months out of the year, now must comply with complex new filing requirements for everyone to whom they pay more than $600 in a year—like plumbers, furnace repairmen, cleaning services, and the list goes on and on and on. It is a nightmare for taxpayers and it should be repealed.”
Another provision that will be considered as part of H.R. 705 deals with recovering overpayments of health care exchange subsidies.
“Under the new health care law, billions of taxpayer dollars will be spent each year on subsidies for individuals who do not qualify for them, some of that as a result of outright fraud,” said Camp. “Congress took steps to close that off in December when we voted 409 to 2 to provide for greater recapture of improper payments as part of the temporary 'doc fix' bill. To better protect American taxpayers, H.R. 705 will increase the maximum amount of health care subsidy overpayments that must be repaid. In rooting out this waste, fraud and abuse, we will save taxpayers $25 billion over the next 10 years. When combined with the repeal of the two 1099 reporting provisions, the amended H.R. 705 will reduce the deficit by $166 million.”
The American Institute of CPAs sent a letter to Camp and the ranking Democratic member of the committee, Sander Levin, D-Mich., urging the committee to repeal the expanded 1099 reporting requirements in the health care reform law and the Small Business Jobs Act.
The AICPA said the “extremely burdensome information reporting requirements…cannot be justified in terms of the limited utility such information reports will provide to the government,” wrote Patricia Thompson, who chairs the AICPA’s Tax Executive Committee.
Like Camp, the AICPA pointed out that this would be the first time that individual taxpayers owning rental property who are not “engaged in a trade or business,” would be required to provide Forms 1099-MISC. For example, many individuals, who own a vacation property that is rented part of the year to help defray their costs, would be subject to the provisions of the SBJA.
“We are concerned that the (1) recordkeeping to keep track of expenses by provider, (2) obtaining of tax identification numbers and other information from providers of property and services, and (3) providing the Forms 1099-MISC during January, a month when taxpayers would not normally be focused on tax issues, would be extremely burdensome,” the AICPA said. “Additionally, the AICPA questions the need for sending information forms to certain providers of services, such as utility companies.”
The information reporting requirements for expenses of $600 or more paid by owners of rental property are effective in 2011, so property owners need to keep records this year in order to prepare and send out Forms 1099-MISC at the beginning of next year, the AICPA noted. Reporting requirements under the health care law are effective for payments made in 2012.
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