Healthcare act may pose paperwork burden for businesses

The IRS Taxpayer Advocate has issued a report expressing concern that a new reporting requirement contained in the Patient Protection and Affordable Care Act may impose significant compliance burdens on businesses, charities and government agencies.

Beginning in 2012, all businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year.

To meet this requirement, these businesses and entities will have to keep track of all purchases they make by vendor. For example, if you are self-employed and make numerous small purchases from your local office supply store during a calendar year that total at least $600, you must issue a Form 1099 to the office supply store and to the IRS showing the exact amount of your total purchases.

According to the Taxpayer Advocate's analysis of 2009 IRS data, about 40 million businesses and other entities will be subject to the new requirement, including roughly 26 million non-farm sole proprietorships, 4 million S corporations, 2 million C corporations, 3 million partnerships, 2 million farming businesses, 1 million charities and other tax-exempt organizations, and more than 100,000 government entities.

The Taxpayer Advocate has not yet reached any conclusions regarding the benefits and burdens of the requirement. But the report expresses concern that the burdens "may turn out to be disproportionate as compared with any resulting improvement in tax compliance."

Read the Taxpayer Advocate's report here.