The Health Care Bill vs The Sole Proprietor

Though I am not sure how successful the changes proposed in the new health care bill will work out for the millions of uninsured, I am fairly certain one of the hidden tax changes is going to hurt many sole proprietors. This article was highlighted on the yahoo home page on Friday and reading about the amount of paperwork the IRS will be expecting me to do beginning in 2012 upset me. I work as an office manager full time and am very familiar with how long it takes to gather the information and send out 1099 forms to our subcontractors each year. The IRS now wants all businesses to send out 1099 forms to all businesses (corporations included) which provide them with $600 or more of goods or services each year.

It's the part about goods that bothers me. As of right now, you only send out a 1099 form to an individual (sole proprietor) who has provided you with $600 or more in services. It makes sense. You are hiring that person to do a service which they will get paid for and which cannot be tracked easily by any other method. Generally people such as myself, who make & sell items to stores, online and at craft fairs are more visible and easy to track down without all this paperwork. Perhaps the teams that are already traveling the state checking for proper business permits could do a bit of multi taskings and pass names to the IRS of companies that they think should be audited. Then again, maybe it's too late to get the hidden tax torture erased from the bill.

Considering I have experience preparing these forms and Homemade by Hoyt would have less than 10 vendors who would qualify for a 1099, I think I can survive the change. However, I think there are many sole proprietors (artists, handymen, contractors, etc.) who work their business full time but aren't very good at paperwork. They manage to produce the required sales receipts, invoices or contracts required for the day to day business, but rely on an accountant to do the more complicated things like taxes. It could cost anywhere from a few hundred to a few thousand dollars for someone to gather the information for you and prepare the forms. Maybe it's because I'm the type of person who believes that people will always find a way to cheat, no matter how hard you try to stop them, but I think this 1099 thing is a bad idea. Are they ready to handle the piles of paperwork they are asking us to send? Do they really think they will make enough additional tax money to pay for the extra jobs? I really hope they've thought this through...