2011

    Press Release


    A A A



    Contact(s):

    Shirley Twillman
    202-434-9220
    stwillman@aicpa.org

    AICPA Urges Repeal of Form 1099 Reporting; House Ways & Means Committee Markup Scheduled 


    Congress should repeal the information reporting requirements placed on businesses and rental property owners by the Patient Protection and Affordable Care Act and the Small Business Jobs Act of 2010, the American Institute of Certified Public Accountants said in a letter to members of the House Ways and Means Committee. The panel is expected to meet on Feb. 17 to mark up legislation that would repeal those provisions in the new laws.

    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.”

    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.  Reporting requirements under the health care law are effective for payments made in 2012.

    A copy of the AICPA’s letter is pasted below.

    If you would like to speak to someone about the burdens imposed by the new 1099 reporting requirements, please contact Shirley Twillman at 202.434.9220 or stwillman@aicpa.org






    February 14, 2011



    The Honorable Dave Camp

    Chairman

    House Committee on Ways and Means

    1102 Longworth House Office Building

    Washington, DC 20515



    The Honorable Sander Levin

    Ranking Member

    House Committee on Ways and Means

    1102 Longworth House Office Building

    Washington, DC 20515



    Dear Chairman and Ranking Member:



    The American Institute of Certified Public Accountants (“AICPA”) is concerned about the significant compliance burdens placed on businesses and rental property owners by section 9006 of the Patient Protection and Affordable Care Act (P.L. 111-148) (“PPACA”) and section 2101 of the Small Business Jobs Act of 2010 (P.L. 111-240) (“SBJA”), respectively.



    The PPACA made two significant changes to the law that will take effect in 2012. First, the act overturns a long-standing tax regulation providing that corporations were generally exempt recipients for Internal Revenue Code section 6041 reporting purposes. Second, the provision expands information reporting requirements to business payments for property (which is in addition to business payments for services, as required by current law). Thus, beginning in 2012 (reports due in 2013 for 2012 payments), if a business generally purchases $600 or more in property or services from another entity (including a corporation), it must provide the vendor and the Internal Revenue Service (“IRS”) with a Form 1099-MISC information return.



    Internal Revenue Code section 6041 currently requires “persons engaged in a trade or business” to satisfy reporting requirements. The SBJA further expands the information reporting requirements to payments for rental property expenses paid by all persons receiving rental income, whether or not they are “engaged in a trade or business,” providing only limited exceptions. Similar to other “persons engaged in a trade or business,” the reporting requirements are triggered upon the purchase of $600 or more in services from another entity. The information reporting requirements applicable to rental property expense payments will take effect in 2011, but would be expanded in 2012 to include payments for property as described above with regard to the PPACA changes.



    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. Additionally, the AICPA questions the need for sending information forms to certain providers of services, such as utility companies.



    For the reasons discussed below, we believe section 9006 of the PPACA and section 2101 of the SBJA should be repealed because they impose extremely burdensome information reporting requirements on businesses and individual taxpayers that cannot be justified in terms of the limited utility such information reports will provide to the government.



    The expansions of information reporting may likely prove to be burdensome to small businesses and individuals particularly at a time of economic challenge. In order to comply with these onerous requirements, taxpayers will incur a significant increase in costs with respect to the accumulation of relevant information and the preparation and mailing of Forms 1099-MISC.



    More importantly, the AICPA believes that the information reported to the IRS will prove of little value to many taxpayers or to the government. Many corporations operate on a fiscal year basis or use the accrual method of accounting and, therefore, receipt of Forms 1099-MISC with calendar year or cash basis information would not prove to be useful to those taxpayers or the government absent burdensome reconciliations.



    In summary, the business implementation costs associated with the likely generation and receipt of millions of forms and the potentially challenging reconciliation processes for taxpayers should be weighed against the uncertainty of the benefit to be derived by the government. American businesses do not need the added cost of more regulatory requirements at a time when their efforts must be focused on profitability and sustainability. Increased profitability is likely to yield more tax revenues than the expansions to the reporting requirement. Although the AICPA strongly supports efforts to reduce the tax gap, we think the extraordinary burden in this instance far outweighs any potential benefit.



    Repeal of section 9006 of the PPACA and section 2101 of the SBJA is the best alternative to imposition of an overwhelming compliance burden on the nation’s small businesses and real estate owners. IRS Commissioner Douglas Shulman has acknowledged publicly that the business community is concerned about the compliance burdens associated with section 9006 of the PPACA. In May 2010, Commissioner Shulman stated that the IRS plans to use its “administrative authority to exempt from this new requirement business transactions conducted using…credit cards and debit cards.” This potential exemption may mitigate some burden; however, we are still concerned with the overall level of burden placed on taxpayers. Thus, we remain convinced that repeal of section 9006 of the PPACA and section 2101 of the SBJA is the best solution for both taxpayers and the government.



    The AICPA is the national professional organization of certified public accountants comprised of approximately 370,000 members. Our members advise clients on federal, state and international tax matters, and prepare income and other tax returns for millions of Americans. Our members provide services to individuals, tax-exempt organizations, small and medium-sized businesses, as well as America’s largest businesses.



    If you have any questions regarding this letter, please contact me at (401) 831-0200 or patt@pgco.com; Peter Kravitz, AICPA Director, Congressional and Political Affairs, at (202) 434-9218, or pkravitz@aicpa.org; or Melissa M. Labant, AICPA Technical Manager, at (202) 434-9234, or mlabant@aicpa.org.



    Sincerely,



    Patricia A. Thompson, CPA

    Chair, Tax Executive Committee



    cc: Members of House Committee on Ways and Means

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