Commentary: The bright side of small business's new paperwork requirements
Are those nails scraping across a chalkboard, or is someone asking a small-business owner to do more tax preparation paperwork?
It's the latter, and Congress has mandated it, with a 2012 start date.
The requirement calls for all businesses and nonprofits buying goods totaling $600 or more annually from any vendor to issue that vendor a 1099 form. The buzz this new piece of legislation is causing can be clearly heard from those it will impact most -- small-business owners, who face additional bookkeeping responsibilities for which they may not be prepared.
Part of the health-care legislation passed in March, the record-keeping will undoubtedly be seen as a burden by many small-businesses owners because of the additional paperwork, which already keeps them up at all hours of the night. Piling on administrative responsibilities puts small-business owners at a disadvantage, in many cases because of minimal to no support staff.
The new requirement is similar to one already in place, requiring forms to be filled out for services totaling $600 or more. Businesses can avoid the requirement by making their purchases with credit or debit cards, but the reality is that many small businesses use checks.
The new tax policy, which is projected to raise $19 billion to help pay for the health-care legislation, will be administered by the IRS.
As word of the new requirement spreads, politicians in both parties are proposing ways to ease the burden. Ideas ranging from eliminating the requirement altogether to raising the dollar amount of goods purchased requiring reporting to $5,000 and exempting businesses with 25 or fewer employees are being discussed. But it is still unclear what will result: The political powers are suggesting polarizing programs to make up for the funds this requirement would have generated.
Certainly Congress can contemplate this provision until the cows come home, and you can bet it will be used as a campaign cry in the days ahead. It is certain to be dragged out and run through the political ringer this year and next year most likely.
But is the new requirement all bad?
There's little doubt the rule will increase paperwork. Yet, there are those who say the requirement will help the government police business owners who have historically avoided reporting their revenues -- leveling the playing field for those who report what they should.
The requirement also could lead to indirect cost savings for many small-business owners. Too many small-business owners wait until the last minute to prepare their records, only to find themselves scrambling at tax time to gather up their receipts and other financial documents and plop them on their certified public accountant. This is a costly, inefficient way for small businesses to use their CPA firms.
And so, even though you haven't heard many cheering for this component of the health-care bill, it may be a requirement worth welcoming.
Greg S. Jones is the chief executive of McLean-based BookKeeping Express, an international bookkeeping business designed to support small to mid-size companies. He can be reached at firstname.lastname@example.org.