
Costly IRS 1099 Mandate Slipped into Health Bill - there
http://www.cato-at-liberty.org/2010/04/26/costly-irs-mandate-slipped-into-health-bill/
======
grellas
Bad as this provision is in itself, even worse is the broader idea that such
items should be "slipped in" to omnibus statutes that are so indecipherable
that no reasonable legislator or member of the public can know all that is in
it before it becomes law. It is indecent that such items should pass and get
signed into law without meaningful debate as to their implications and without
any form of public scrutiny whatever. In the meantime, we the taxpayers are
stuck with the consequences.

~~~
soundsop
It is amazing to me how many critical aspects of an open democracy are
dependent on rules of house/congress/parliament.

This sort of unrelated/obfuscated clause insertion and the 60-vote requirement
to defeat a filibuster are two prime examples.

Will there have to be constitutional amendments saying1) bills must be clear
and address only one topic, and 2) simple majorities shall always rule, expect
in pre-specified cases, and no parliamentary rules shall override simple
majority in letter or in spirit.

~~~
koanarc
So Congress can't be trusted to pass simple bills, but they should be trusted
to amend the Constitution?

~~~
jerf
My goodness, could you imagine it? The entire Bill of Rights would fit in the
preamble of Amendment 28... quite possibly the entire Constitution as amended.
(Because we all know Congress isn't _serious_ about something unless it
produces a bill measured in thousands of pages... and stop questioning their
wisdom in creating such bills, you ignorant plebes.)

------
petercooper
Rule #1 from history class: only trust the primary source. And since none of
the main articles about this issue seem to be quoting the primary source in
full, here you go:

    
    
      SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.
      
          (a) In General.--Section 6041 of the Internal Revenue Code of 1986 
      is amended by adding at the end the following new subsections:
          ``(h) Application to Corporations.--Notwithstanding any regulation 
      prescribed by the Secretary before the date of the enactment of this 
      subsection, for purposes of this section the term `person' includes any 
      corporation that is not an organization exempt from tax under section 
      501(a).
          ``(i) Regulations.--The Secretary may prescribe such regulations 
      and other guidance as may be appropriate or necessary to carry out the 
      purposes of this section, including rules to prevent duplicative 
      reporting of transactions.''.
          (b) Payments for Property and Other Gross Proceeds.--Subsection (a) 
      of section 6041 of the Internal Revenue Code of 1986 is amended--
                  (1) by inserting ``amounts in consideration for property,'' 
              after ``wages,'',
                  (2) by inserting ``gross proceeds,'' after ``emoluments, or 
              other'', and
                  (3) by inserting ``gross proceeds,'' after ``setting forth 
              the amount of such''.
          (c) Effective Date.--The amendments made by this section shall 
      apply to payments made after December 31, 2011.
    

From the full text of the bill at
[http://www.gpo.gov:80/fdsys/pkg/BILLS-111hr3590PP/html/BILLS...](http://www.gpo.gov:80/fdsys/pkg/BILLS-111hr3590PP/html/BILLS-111hr3590PP.htm)

~~~
bd_at_rivenhill
In this case, the primary source appears to be indecipherable to anyone except
for a lawyer who already understands section 6041 of the Internal Revenue Code
of 1986 and all of the amendments that have been applied to it since it was
enacted, so I'm not sure what good you're doing by quoting it.

Maybe we should try to have them put the statutes into git so we don't need to
waste lots of time looking at the diffs.

~~~
petercooper
_In this case, the primary source appears to be indecipherable to anyone
except for a lawyer who already understands section 6041 of the Internal
Revenue Code of 1986 and all of the amendments that have been applied to it
since it was enacted, so I'm not sure what good you're doing by quoting it._

Most open source code is indecipherable to anyone but a programmer, but seeing
it can at least provide some reassurance. Most political and legal processes
are indecipherable or opaque to the general population, yet _attempting_ to
understand them is a positive thing.

Having the primary source to hand is useful to ensure that you're not having
the wool pulled over your eyes by a biased secondary reporter. A news site
could easily misinterpret legalese.

Cato is hardly the National Enquirer, but even so, they only cite a) a tax
research paper that costs $75 to obtain, b) a tax CPA whose words are not
reproduced anywhere else, and c) the venerable "Air Conditioner Contractors of
America." There aren't enough references to primary sources to rule out a
less-than-sincere attempt at shaping public opinion (not that that is
necessary the case, just that it _could_ be).

There's a lot to be said for trusting news sources in order to save time, but
taking a look at the primary source yourself in many instances can prove
illuminating, and is certainly a responsibility for anyone who's going to
proceed to get upset/angry or campaign against whatever the news/article is
covering.

------
mark_l_watson
Flip back through the pages of history: during the few hundred years that the
Roman Empire was collapsing, the tax collectors became so violent and
generally oderous that in some cases Romans living on the geographic fringes
of the Empire welcomed invaders because a change of government looked good to
them.

I expect the same to happen in the USA. Local governments and the federal
government need money to operate on. In the best case scenario, two things
would happen: drastically reducing government spending on the military and
not-so-essential social services, and, slightly raising taxes. Neither of
these reasonable things will get done.

~~~
hga
There were also related exactions like forcing people to continue the carrer
of their father, because of course that type of job was heavily taxed.

This is also thought to be the start of European feudalism. As things broke
down and Rome's ability to enforce its will waned, becoming the vassal of a
local boss was a way to escape this mess.

------
pg
This is like a high-res Sarbanes-Oxley.

Can anyone figure out who inserted this clause?

~~~
pmh
It was introduced in Senate amendment 2786:
[http://www.govtrack.us/congress/amendment.xpd?session=111...](http://www.govtrack.us/congress/amendment.xpd?session=111&amdt=s2786)

It's huge so it's hard to tell who was specifically responsible, but it was
sponsored by Sen. Reid and cosponsored by Senators Dodd, Baucus, and Harkin

~~~
tomjen3
Dodd really needs to have a heart attack, he has been trying to kill startups
for the past two years.

I wonder who lines his pockets? Anybody know?

~~~
riffic
opensecrets.org, it isn't hard to find out.

[http://www.opensecrets.org/politicians/summary.php?cid=N0000...](http://www.opensecrets.org/politicians/summary.php?cid=N00000581&cycle=Career)

------
krschultz
This won't last. One truth of politics is that pissing off a few people is
easy, pissing off everyone is hard. (That's how the rich and youth end up
getting screwed all the time). If you force this on literally every single
company and contractor in the country you will be losing a lot of campaign
donations in the next cycle. If it comes into effect as described it will be
modified/repealed within a year.

~~~
pyre
No law gets repealed. They'll just pass a new law that changes the previous
one. It's sort of like CSS for Congress... cascading legislature...

~~~
bitwize
Worse, it's like diffs for congress without any version control:

"Title Blah Section BlahdyBlah(c)(4) shall be amended as follows: by striking
'shall not' and replacing it with 'may, phase of the moon permitting', and by
striking 'foobars' and replacing it with 'all foobars, foreign and domestic,
and any bazes and quuxes appertaining thereto'."

The language of the Constitution and its amendments is wonderfully tacit and
accessible. Why can't statute law be so? Oh, right, because then it would
obviate many uses for lawyers. Can't have that...

------
roboneal
And it's not just for $600 or larger transactions, it's an accumulation of
said transactions for a tax year. This is going to be a paperwork nightmare.

~~~
CWuestefeld
Maybe it's intended as a subsidy for the Postal Service.

~~~
bd_at_rivenhill
It's intended as a subsidy for accountants and tax lawyers. Congress is the
biggest example of regulatory capture anywhere: the lawyers always win.

------
DanielBMarkham
I hate to be a wag, but the news today about government intervention in small
businesses has gone into turbo mode.

Is now the time we get out the pitchforks and torches and go up to the castle?
Or should we wait a while longer?

~~~
fnid2
I know you are joking and this is something I think about. I heard about a
protest at JP Morgan where people where chanting and wanted to deliver a
letter to the CEO.

However, I really hope it isn't a violent incident. We don't need a war here
anymore than we need a war in the middle east. Civil wars are bloody and
costly and horrible.

My suggestion: Vote out all incumbents.

~~~
DanielBMarkham
Agreed. I promise to only carry a torch and take notes of anybody I see with a
pitchfork. :)

I read an analysis once that said that the problem wasn't that representatives
weren't responding to the people's wishes, it was that the mob basically
ruled. This is why you have governments making more promises than they can pay
for and the continuous search for the current Dr. Frankenstein to go storm his
castle.

Not sure of the veracity of that analysis, but I found it both counter-
intuitive and interesting.

We're technical guys. We should know complex systems. We should know how
people design and interact with complex systems.

I believe our system of government is becoming legacy code. That's not by any
means to call for violence. I simply mean that the system has become too
complex for most practitioners to understand, too complex to micro-manage, too
complex to be able to design results by committee, and too complex to be able
to maintain effectively.

Beats me where you go from there, but after seeing a dozen failed complex
computer systems, I know a failed system that is spinning off into complexity
land when I see one.

I also agree. Vote them all out. Enact term limits now, before we start a new
generation of Earls and Dukes -- professional politicians with a lifer
mentality.

------
icey
I don't know anything about this mandate, and when I tried to google for more
information I could only find citations on right-wing blogs. Nothing in any
news source, nothing from an independent source, nothing.

Before everyone gets up-in-arms about this, it might be wise to at least try
to seek out some real citations. The Cato study may be correct, but it's
impossible to tell from the linked story.

~~~
chasingsparks
[http://www.opencongress.org/bill/111-h3590/text?version=enr&...](http://www.opencongress.org/bill/111-h3590/text?version=enr&nid=t0:enr:12100)

The first blockquote from Thomson-Reuters Ria refers to the reconciliation
bill section that I linked to via OpenCongress. For tax purposes, RIA is a
very good source and is certainly independent. Unfortunately, it appears like
you can't read the report for free. However, reading the bill text it does
look like the they are saying 1099's are no longer for wages alone.

(Bias note: I once worked for Cato.)

~~~
icey
Awesome, thank you.

That looks like it's a pretty good starting point. I just get nervous when I
see articles talking about the impacts of a bill and their only sources are
other articles talking about the impacts of a bill, and not the bill itself.

------
rbranson
<http://www.theapchannel.com/accounts-payable/node/522>

From above:

Although these changes were passed in the new health bill, they are not new
ideas. The White House and Congress have been trying to require corporate
reporting for years. The measure was included in budget proposals issued by
Presidents Bush and Obama.

"This has bipartisan support," says Doug Rogers, director of consulting
services at IRSConsulting. "It was never a matter of if, but when."

------
spamizbad
If Cato's interpretation is accurate, this will likely be repealed. The IRS
doesn't have the capabilities to process that many 1099s.

------
sev
_which an information return to IRS will be required if the $600 aggregate
payment threshold is met in a tax year for any one payee_

What was the minimum amount to be exceeded where a 1099 was needed before this
law passed? I've received 1099s for work done around $2000 in 1 year.

~~~
ars
The dollar amount didn't change. What changed is that now corporations need to
be sent 1099's, while before they didn't.

------
johns
Can you imagine how many 1099s a company like Amazon would have to respond to
under this system?

~~~
cookiecaper
Or Home Depot, or the grocery store, or your favorite restaurant, or...

I understand that the law applies to corporations, but if you take your
company out to lunch once a week a handful of times on company money, assuming
your company has 10 people or more and your restaurant is ten dollars per
plate, you'll have to file a 1099 if you go there for more than six weeks. Or
if you buy more than $600 worth of equipment in a year from Wal-Mart or Home
Depot or anything like that, you'll have to file a 1099 for them, too.

That's how I understand it anyway. Someone please correct me if I'm wrong.

------
schwit
Time to get rid of all federal taxes except a national sales tax. Our Rube
Goldberg tax system has got to be the single biggest drag on economy. Imagine
the money that goes into complying with taxes doing something constructive.

~~~
gte910h
People just don't seem to get it: We have a byzantine tax code to made people
do X instead of Y and to not do Z in favor of Q.

Congress wants to do these things, and the tax code is the easiest way to do
them. Congress will STILL want to do these things even if you do fair tax.

If the fair taxers get their way, we'll likely end up with income AND vat 10
years down the line. Ech.

And you realize: Fair Tax would ALSO cover all investments? Buy a house: 40%
to the governement. Buy stocks: 40% to the governemnt, etc.

~~~
Dove
Neither of those claims is true.

The current Fair Tax legislation is tied, not merely to abolishing income
taxes, but also to repealing the 16th amendment. Last I read about it, it
would not go into effect, even if it passed, until Congress _lost all ability
to levy income tax at all._

And FairTax has a pretty narrow conception of what constitutes consumption.
Certainly not stocks, as you suggest. Investments in general are excluded. And
any used items--used homes in your example--are excluded.

[http://www.fairtax.org/site/PageServer?pagename=about_basics...](http://www.fairtax.org/site/PageServer?pagename=about_basics_thumbnail)

~~~
hga
This may be true, but how sure are you that the proponents of the FairTax will
keep control of the process to ensure that outcome?

The income tax gives politicians tremendous power over the entire above ground
economy and almost all the population, why would they give that up?

Since when have tax reforms in the West resulted in a wholesale _replacement_
of one type of tax by another, instead of a layering? If you could point to a
few exceptions I'd be interested.

~~~
Dove
It's not a question of history, but of the way the bill is written. In stark
contrast to the law that is the topic of this thread, the bill has been online
to view for _years_ , and even has a summary in plain english:
[http://www.fairtax.org/PDF/PlainEnglishSummary_TheFairTaxAct...](http://www.fairtax.org/PDF/PlainEnglishSummary_TheFairTaxAct2007.pdf)

How do I know the income tax will really be gone? Section I of the bill
abolishes all income, estate, payroll and gift taxes, repealing sections A, B,
and C of the Internal Revenue Code in their entirety. Sec 301 disbands and
defunds the IRS, and requires that all its records be destroyed in a year. And
sec 401 contains a sunset clause that negates the whole thing (both the sales
tax and the abolishment of the income tax) if the 16th amendment to the
constitution is not repealed within seven years. Thereafter, any attempt by
congress to bring back an income tax would be, not merely unpopular, but
actually _unconstitutional_. And they'd have to build up the infrastructure
from scratch.

These guys are deadly serious.

Why would politicians give up power like that? Not sure. But there are a lot
of them who say they'd be willing to: <http://www.fairtax.org/cgi-
bin/scorecard.cgi>

Whether or not you think the Fair Tax is a good idea (and obviously I do),
it's a model for how law ought to be made. In public, with a lot of visibility
and discussion up front, a lot of time for question and answer, the full
technical details exposed. The bill is not a tangled mess of amendments, but a
well thought out and cohesive whole.

~~~
hga
Ummm, what magic set of legislative rules would allow this bill to get a
single up or down, no amendments, vote?

There's also the inconvenient fact that no Congress can tie the hands of a
future Congress.

The only way to accomplish this in our system would be to get a single
amendment to the Constitution that would simultaneously repeal the 16th
Amendment and replace it with the FairTax, and then get 3/4ths of the states
to ratify it.

------
olefoo
If the federal government were to aggressively enforce this it would amount to
a default ban on cash transactions between businesses.

~~~
hga
How so? This provision requires the reporting of a payment; it doesn't say
anything about the instrument(s) used to make that payment.

~~~
olefoo
It simply comes down to convenience. It may not be technically illegal to make
cash payments for services or goods, but this would mean that you have to
track all such payments and who the payee was, in case you paid more than $600
to a given entity. At which point there's enough paperwork already that
cutting a check, or authorizing a funds transfer is easier.

So while it wouldn't necessarily make cash transactions illegal, it would make
them stand out more and be scrutinized more carefully.

------
jrockway
Will I really have to submit a 1099 to the IRS for my phone bills, electric
bills, rent, etc.? I have a feeling someone misread this.

~~~
ratsbane
That was my thought too. If I buy a car, do I have to send the dealership a
1099? Worse yet, if I spend $601 on gas at the same gas station in $30 chunks,
do I have to keep track of the receipts at the end of the year and send them a
1099? What if it's at three different gas stations all owned by the same
company. How do I know? Ask for their EIN every time I pay? This would be a
complete disaster. Surely this isn't what the bill actually requires?

~~~
hga
Only if it's a company car.

And, yeah, this would get into quite a mess. If your company was large enough
and paying for the gas, they'd pretty much have make you use a card that would
allow them to consolidate the payments with all the other company cars to know
if they have to send 1099s.

------
fnid2
What are the penalties of non-compliance? If you just don't bother with the
1099's, what happens? Fines? More taxes? That's really what we need to know.
If there are no penalties, there is no law.

~~~
cschneid
<http://www.accountingpartners.com/fines.shtml>

Quick google says minimum of $50/per, max of $250k per business.

------
stretchwithme
we need to redesign the mess that is our federal government.

it is careening towards disaster and the fools in Congress just want to rev
the engine.

------
larsberg
Hopefully this means Apple and AdMob will finally have to send me a 1099 for
my iPhone app payments. I'm really sick of gathering the numbers by hand,
reporting them as individual income, and then praying I don't get audited and
have to provide copies of... CSV files from iTunes Connect that aren't even in
local currencies?

------
ajross
Could we maybe have a less partisan analysis? I mean, FTA (no joke):

 _For what purpose? So the spendthrift Congress can shake a few extra bucks
out of private industry? The business sector is the generator of America’s
high living standards, but most federal legislators just see it as a kitty to
be raided or a cow to be milked dry._

------
jared314
Sounds like a business idea, for doing e-taxes and e-payments, in the making.

------
patrickgzill
Was it a slipup? Or will it just force more people to form corporations?

~~~
hga
Won't make a difference, I gather. E.g. previously if you were a business and
paid rent to a landlord who was a individual (e.g. he reported that income on
his individual income tax forms) you'd have to file a 1099. Now, in all cases,
you'll have to file the 1099 (well, unless the rent is less than $600 per
year).

~~~
patrickgzill
What I mean is that in most cases, corporations do not have to receive a
1099-MISC from you, no matter how much you pay them. see
<http://www.irs.gov/instructions/i1099msc/ar02.html>

~~~
ars
And this law changes that, so now corporations need to be sent 1099's as well.

------
shykes
When is this effective?

~~~
pmh
All payments after Dec 31, 2011. FWIW, there's already a bill in the House to
repeal this section (introduced the same day the article was posted it seems):
<http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5141>:

------
eli
I'm having a hard time believing this is true. The language in the bill itself
is totally indecipherable (to me), but the only people claiming it would be a
huge burden have a clear ideological or political bias.

------
aneth
This may have been slipped in as a precursor to instituting a VAT.

~~~
gills
As in "see, look! VAT is _waaaaay_ simpler than this tax system.

argh.

------
CamperBob
How could this possibly have not been noticed before?

~~~
uuilly
Thousands of pages of barely parsable legalese, constantly changing in
different places to keep different politicians on board, the final copy rammed
through before the ink dried, what could possibly go wrong? From an
engineering perspective the health bill was a QA nightmare.

~~~
abstractbill
Don't pretty much _all_ bills work this way? Was the healthcare bill really so
different to the norm?

~~~
uuilly
Not at all. This bill is notable for its complexity, scope and unpopularity.
Day by day people disliked it more and more and everyone involved wanted to
get it off the TV as soon as possible. When a bill is more popular there is
less thrashing. People don't need to desperately alter things to appease
individual politicians. Each of those patches is essentially a hack to cover
one corner case. This bill is full of them. Popularity equates to a more
stable code base. Politicians are also more productive when doing something
popular. They are less likely to "grab what they can" and more likely to
contribute to the bill's success and thus their re-election.

We've all been there... A few nights before a release we realize we have an
unmaintainable mess and the deadline needs to be pushed so we can go back to
square one. This is what happens when you release anyways.

