Sen. Olympia Snowe, R-Maine, criticized the U.S. Small Business Administration after it missed a deadline to send comments to the Treasury Department and the IRS about a controversial new 1099 reporting requirement for businesses.

Snowe, who is the ranking Republican member on the Senate Small Business and Entrepreneurship Committee, blasted the SBA’s Office of Advocacy for failing to submit comments by the Sept. 29 deadline on the IRS’s new 1099 form mandate, which was included as part of the health care reform bill. The provision requires businesses to file a 1099 form with the IRS if they purchase goods or services from the same vendor that total at least $600 per calendar year.

In a letter Wednesday to the SBA’s Chief Counsel for Advocacy, Dr. Winslow Sargent, Snowe called on him to outline a plan for how his office will address the 1099 issue to mitigate the impact of the new requirements on small businesses.

"Repealing this onerous provision has been a top priority for the entire small business community; but regrettably, not only did Congress fail to repeal it as part of the Small Business Jobs Act signed into law last week, that bill actually expanded its scope and increased penalties for failure to collect and remit this information," wrote Snowe. "The practical effect of this measure will mean that millions of businesses will have to send billions of new information reporting forms to the IRS and other businesses. The fact that the SBA Office of Advocacy - the government's sole watchdog for small business - had nothing to formally say about this burdensome mandate is troubling, and it has led me to question whether the independence of that office is threatened."

One of Snowe’s colleagues, Sen. Mike Johanns, R-Neb., introduced an amendment to the Small Business Jobs Act to repeal the 1099 provision. Snowe voted for the amendment, but it failed to pass the Senate by a vote of 46-52. Democrats also introduced an amendment to scale back the requirement, but it too failed to get enough votes.

Winslowe expressed dismay after receiving Snowe’s letter and issued his own statement. “I am surprised and disappointed by Senator Snowe’s portrayal of the Office of Advocacy’s actions regarding the expanded IRS Form 1099 reporting issue,” he said. “The Office of Advocacy has been actively involved with the small business community and the Internal Revenue Service on this issue. We hosted a roundtable for small businesses and their representatives to hear their thoughts and concerns regarding the 1099 requirement. Senator Snowe’s staff was invited to participate. Immediately after this roundtable, my office initiated a conference call with the IRS regulatory attorneys responsible for drafting guidance. We were able to report small business concerns directly to IRS on the expanded reporting requirement. I personally met with the IRS Chief Counsel earlier this week and discussed the input that I have received from small businesses on this issue. During all this time my staff has informed Senator Snowe’s staff about our activities.”

“Advocacy chose not to provide public comment to the Treasury Department and the IRS,” he added. “Their request was for information on ways to reduce the burden of reporting and record keeping required with the Form 1099. At our roundtable the small business participants unanimously indicated that the request for information did not address the full impact of the 1099 burden on small business. Nevertheless, Advocacy made its concerns regarding the guidance document known to the IRS through its confidential interagency process, which is a tool Advocacy frequently uses and that, on numerous occasions, has had an even greater result than a public comment letter. The issues facing small business are numerous, challenging and complex. We will continue to stand firmly on the side of small business and independently represent their interests.”

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