Issue #17&18 August-September 2009

The Top 9 from

One of the more interesting, if often less pleasant, aspects of working in Washington is a front-row seat watching government dream-up and subsequently blow-up well-intentioned ideas that could become practical nightmares for small-business owners. In fact, if it were not for the entertainment value, the state of affairs could get downright depressing because some of these brainchilds fail to self-destruct and actually become law. This brings us to report on a real doozie, now in the works.

The latest entertainment is innocuously called “corporate reporting.”  The good intention is to raise an estimated $1.73 billion a year in revenue, peanuts by Federal Government standards, through reducing the amount of unreported corporate taxable income.  So far, so good!   But then reality strikes?  Under the proposal, businesses would be required to send every business from which they purchase more than $600 a year worth of goods and/or services, the corporate equivalent of a 1099.  Currently, business only reports their transactions for services from unincorporated businesses.  But the proposal expands the requirement to incorporated businesses and transactions involving property (property has not been defined yet and that is probably pretty important).  Copies must also be filed with the IRS.  To paraphrase one manufacturer upon hearing of the proposal, “Oh, my gosh, I have 13,000 suppliers.’

So, let’s see how it works.  Small Business A, an office supplies company, sends employees to two different trade shows. The employees stay at Holiday Inns and hotel bills are $1,500. Small Business A pays by credit card. At year’s end, the business adds up all purchases from Holiday Inn, sends a 1099 to Holiday Inn for $1,800 and a copy to the IRS.  But wait!  One Holiday Inn was company-owned and the other was owned by a franchisee.  Holiday Inn discovers the error.  So, Small Business A must refile with the Holiday Inn (franchisor), the Holiday Inn (franchisee) and the IRS.   (How this would be handled if the employees were simply reimbursed is open to speculation.)  Of course, the purchase of gasoline for the firm’s two delivery trucks would be considerably trickier considering the number and location of purchases.  A similar filing must be produced for every supplier that has sold the firm more than $600 worth of stuff, whether in increments of 600 $1 purchases or one $600 purchase.  But Small Business A also has customers, lots of them.  At the end of the year, it is inundated with 1099s from its customers which must be checked.  The IRS is inundated, too.  What happens to those 1099s?  Presumably they are stored

The National Small Business Poll issue, Paperwork, offers an insight into the current paperwork problem facing smaller firms. Should corporate reporting not implode, new Poll data on paperwork may have to be collected!


The NFIB Research Foundation

The TOP 9 Questions for August & September 2009