Chief Counsel Testifies, Calls for Repeal of 1099 Requirement

The U.S. Small Business Administration’s Chief Counsel for Advocacy Winslow Sargeant has called for the repeal of expanded Form 1099 reporting requirements, according to the December issue of The Small Business Advocate. He testified at a November hearing before the U.S. Senate Committee on Small Business and Entrepreneurship, “Next Steps for Main Street: Reducing the Regulatory and Administrative Burdens on America’s Small Businesses,” which focused on regulatory issues that affect small businesses. Sargeant’s testimony is online at www.sba.gov/advo/laws/test10_1118.html.

According to Sargeant, the cost to small businesses of complying with Internal Revenue Service tax regulations is over 300 percent greater per employee than the cost to large companies. The expanded Form 1099 provisions set to go into effect Dec. 31, 2011, would greatly increase the reporting and recordkeeping burdens on small businesses in two ways. First, the expanded requirements significantly increase paperwork. One individual cited in Sargeant’s testimony stated that the new rules would increase his business’s tax year filings from 10 1099 forms to 360. Second, businesses will need new internal data controls to address the expanded reporting requirements. Most small businesses do not have personnel trained to manage such systems, so costs of compliance will be daunting.

With his testimony, Sargeant joined many other business and government leaders who have called for the repeal of the expanded 1099 requirements. Congress has examined a number of repeal plans over the last several months, but none have been passed.

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