1099 will end the world in 2012

[DanielBMarkham]

[warning. rant head]

This has to be the most mind-numbingly stupid thing I have seen the government do in the last couple of decades -- and that includes bad wars, if that's your thing.

Why can it be so bad? Because it screws with every single economic entity in the nation, in a way that pervasive, subtle, and micro-managing.

If you want to know where "1984" is, with Big Brother watching all of your moves, it's not bullshit programs like TIA. It's making you rat out the guy who is on disability but mows lawns on the side, or the guy who paints houses at nights without reporting the income so he can send his kid to school. Or the mom that babysits kids so that she can stay home.

Yes. These people are law-breakers. In a web of such complexity that 80% of IRS's own employees can't answer sample tax questions, we are all law-breakers. But this takes tax collection to a new low -- now I am going to be responsible for "double-checking" on my neighbor who sold me those used lawn mowers last year. I need to do my part to make sure he's reporting everything.

It is so outrageously stupid and infuriating that I still can't believe it is true. I'm beside myself. So if I eat at Burger King during the week when I travel, about the 120th time I buy a burger, I need to chalk them up for a 1099.

It's the worst thing for small businesses and the underground economy that I've ever heard of the government doing. It just can't be true.

</rant>

ADD: And don't get me started with some bullshit about how the agency hasn't decided yet how to enforce it. This is like saying the Congress voted to install cameras in everybody's homes, but that might not be so bad because the administrative work hasn't been done to decide who exactly gets a camera and when. As if this somehow mitigates things.

Also, for all of you folks down-voting me. Tell me I am wrong. I'm not a tax professional and I don't read the political spin sites. The only reason I've commented now is that this is the 3rd or 4th time I've seen this posted on HN. So please. I would love to be wrong about this.

[subwindow]

What the hell is up with this thread? This has to be the worst thread I've ever seen at HN. You'd think this were a comment thread on Fox News or something.

People: Chill the fuck out. The IRS is accepting comments on the issue. The rule doesn't go into effect until, realistically, April of 2013. By then, it is almost guaranteed that the rule will be significantly weakened to the point where it is not much different than what we have in place now.

This isn't a world-ending or economy-destroying fuckup organized by big-governement Democrats. It was a short-sighted clause put in by a politician trying to close a loophole. This is why we have checks and balances- the executive branch, which is actually in charge of implementing these rules, will implement them in a sane way.

So put your conspiracy theories to bed and get on with life. File a comment with the IRS and wait a couple of years. Then maybe you'll see that this was just one big stink over nothing.

[jimbokun]

"By then, it is almost guaranteed that the rule will be significantly weakened to the point where it is not much different than what we have in place now."

This is probably only true if people flip out over it now.

[Confusion]

  The IRS is accepting comments on the issue.
  [..]
  It was a short-sighted clause put in by a politician
  trying to close a loophole.

It's not just one politician: a great many people have been over these documents. It seems none of them realized how insane this is. Or perhaps none of them could be bothered to do anything about it? Either way: means there's something seriously wrong right there. If enough sillyness makes it through to this level, at some point the sillyness will actually make it all the way through.

[nkassis]

Realistically most new bill have a ton of shitty things in them that get fixed through other bills later on, it's always been like that and the small business lobby is fairly powerful so 2 years should be enough to kill this clause.

[brianpan]

What is up is the inflammatory submission title and linked page got people all riled up. There is not really a good reason to be linking tax codes with the end of the world. I'd downvote the submission if I could.

[Tangurena]

The current rules for the filing date for the copy of the recipient's copy of the 1099 is Jan 31. The electronic filing deadline for the IRS's copy is Mar 31.

[fexl]

Even if it does go through exactly this way, very few people will comply with it, so the probability of getting singled out for serious retribution should be fairly low. So there's yet another reason to chill out.

[Sirocco]

In all seriousness, the Reddit influx is upon us, full tilt.

[Anechoic]

The good news is that purchases made with a credit or debit card will be exempt from this requirement. However this requirement is still likely to be a huge pain for me at least because I use PayPal for a lot of vendors for totral purchases over $600 in a year.

The IRS is accepting comments on this requirement at http://www.irs.gov/newsroom/article/0,,id=225029,00.html

[abalashov]

Sounds like quite a handout to credit card companies.

[jcnnghm]

This will be an unmitigated disaster. Office Depot will get 50 million or so 1099's. How do you deal with that many accounting discrepancies? How do you match that many transactions to all those forms. What about under and over-reporting? This is a Democrat clusterfuck if there ever was one.

[InclinedPlane]

More likely: most businesses will completely ignore this rule. It will either go away before it comes into force or it will be so impractical to police that it will be useless.

[Retric]

This does not apply to transaction made with a credit card so I don't think Office Depot is going to notice.

[dsmithn]

If a company purchases anything over $600, they still only have to submit one 1099.

[roboneal]

This can't generate remotely enough revenue to offset the compliance cost to the business sector.

This is nothing more than a Federal jobs program at the expense of the private sector.

[mattmcknight]

Part of what they are doing is getting the system ready to put a sales tax on services. That will generate some serious revenue (or provide another effective mechanism to steal money from some people to give to other people, depending on your perspective.)

[subwindow]

Wow. Jump to conclusions without evidence? Sign me up!

More likely it was an attempt to close a perceived tax loophole without understanding of the cost of compliance. I have no doubt it will get fixed before it actually goes into effect.

[mmaunder]

There is an incredible amount of rhetoric from both sides of the isle on supporting small businesses, supporting the entrepreneur, that entrepreneurs are the job creators, that innovation will lead us out of this recession. But it's all just politically correct talk.

This forum is filled with entrepreneurs and innovators. It has one of the highest density of job creators of any forum on the web. Has anyone here seen any help from the government in creating jobs? Either on the supply side (grants) or on the demand side (tax breaks)? Or by reducing our administrative workload? From either side of the isle, conservative or liberal?

Instead we have bureaucratic nightmares like this 1099 legislation that create work that has a not insignificant opportunity cost for innovation and job creation in this country. You could be coding, but instead you're issuing 1099's to walmart.

The reality is that even if this passes, we'll all do just fine and keep innovating. But the next time some politician tells you he supports job creation in this country be sure to call bullshit on him. They only say it because it sounds good and they have done nothing to help us create jobs.

[count]

Check out: http://www.taxgirl.com/new-rules-about-forms-1099-are-causin...

for a less dramatic look at things.

[mcritz]

Thanks that link was the most helpful thing I read on the matter.

[ck2]

http://money.cnn.com/2010/05/05/smallbusiness/1099_health_ca...

  In any case, the final impact of the law won't be known 
  until the IRS issues its regulations on the new law, 
  which aren't expected to arrive until sometime next year. 
  The IRS has not yet commented on when it will release   
  regulations or schedule public hearings, and an agency  
  spokesman was unsure when it will do so.

[rick888]

It's things like this that will eventually force me to move my business (and invariably, my employees) to another country. Why do they want to make it even more difficult for small businesses?

[nhebb]

Last year a customer accidentally double entered my invoice in their system, and paid me two checks instead of one. I contacted them to let them know of the discrepancy, and never cashed the second check. Their system was never corrected, and I got a 1099 showing I earned double the actual amount. I'm still trying to iron this mess out, and it's just one 1099.

[javery]

Already discussed here in-depth: http://news.ycombinator.com/item?id=1306434

(and about 10 more I don't feel like linking)

[rortian]

A bunch of uninformed whining is hardly in-depth. You'd think you couldn't file these electronically or that people have to create, gasp, invoices for the vast majority of such transactions.

[patrickgzill]

The underground economy will explode. Working under the table will become much more prevalent.

[lsc]

maybe? the problem is that if I pay you under the table, I'm paying you out of /post tax/ money. this is to say, paying people under the table costs me about 50% more than reporting it. I don't think 1099s jack up the cost /that/ much.

[phreeza]

Sounds like a business opportunity to me? Build a specialized service that handles those for mom'n'pops, small businesses, etc?

[donw]

And how; a service that just catalogues tax IDs and handles sending out the right paperwork would make mint... this might be perfect for somebody like Indinero (a recent YC addition).

[ojbyrne]

New budgeting guideline - spend no more than $599 at any individual supplier.

[randallsquared]

Or, use a credit or debit card for purchases that would otherwise aggregate to more than $599.

[sophacles]

Wait -- wouldn't this help the economy by creating many competing entities in any given space?

[yummyfajitas]

Unlikely, that sounds like more work than just sending out the 1099.

[akmiller]

I don't like this at all but if you want to attempt to take a positive spin on it you could see that this would be a lucrative area for many startups to start offering services for handling these 1099's.

[kaens]

It's almost like the government is trying to get its populace to silently replace it.

[shadowfox]

With what?

[rwhitman]

I know this is a really alarming issue, but there's no way this will ever happen. Business lobbies are far too powerful to allow something like this to slip by without a serious fight, and we've got 2 years.

Solution: write your congress person. Sign petitions etc and make a whole lot of stinkin noise..

But I'm sure every Fortune 500 corp will be making even more noise about this than small business owners. I can't imagine Walmart likes this anymore than Joe's Hardware

[terrellm]

In addition to the 1099 nightmare, there's also the S-corp self employment tax nightmare where all s-corp income has the 15.3% self-employment tax imposed, not just the earned income. I predict a mass switch to C-corps.

From http://www.businessbrief.com/feds-take-aim-at-small-biz-loop...

Both House and Senate bills address what some lawmakers see as evasion of employment tax by certain individuals. The Internal Revenue Service has stated that many taxpayers receive nominal salaries and take their earnings through distributions by S corps., limited partnerships, or other entities. The House and Senate bills would change that situation by imposing self-employment payroll taxes on 100% of S-corp. pass-through income when:

- The S corp. is engaged in a professional service business, with the key assets being the reputation and skill of no more than three employees, or

- The S corp. is a partner in a professional service business.

[borisk]

A popular tactic of totalitarian governments is to pass laws which everyone will have to break. So that if they don’t like someone, there is always a lawful reason to take them down.

[jorgem]

We should do that to migrant labor.