Small businesses are greatly affected by tax reporting requirements. If the government isn’t careful, compliance with these requirements can become excessively burdensome for business. And that, in turn, can hurt productivity and make small businesses less competitive.
In other words, business income taxes involve a fine line. Our tax system is based on the premise that both individuals and businesses will pay their fair share. But if businesses are subject to too many reporting requirements, it becomes harder for those businesses to generate the jobs America needs to regain strong economic growth.
Consider, then, one particular tax reporting requirement: a relatively new one involving 1099-K reports. In 2008 legislation, Congress required the IRS to collect 1099-K reports from credit card companies and other third party payment companies. The purpose is to document credit transactions that have occurred within a merchant’s business during the tax year.
There is concern in Congress that the rule expects too much from small businesses if they have to reconcile the reports they receive from outside companies with their own internal records.
Two members of the U.S. House are offering a bill to address this concern. The proposed bill is called the 1099-K Overreach Prevention Act. It would restrict what the IRS is allowed to do with data from 1099-K reports submitted by third parties. The IRS would not be able to require businesses to reconcile these reports with their own internal records.
The proposal has support from the U.S. Chamber of Commerce, as well as the National Federal of Independent Business.
Source: “Lawmakers Introduce Bill to Limit 1099-K ‘Overreach’,” Accounting Today, 2-7-12