Saturday, November 6, 2010

1099 Forms to Catch Tax Dodgers?

A little-noticed provision of the health care overhaul law will require small businesses to file a 1099 form with the Internal Revenue Service if they buy supplies or services worth more than $600 from any vendor - even corporations. The controversy has been over the administrative burden of keeping records and filing 1099s for things like gasoline, office supplies, lunches, etc.

But the interesting question is why anyone ever thought this was a good idea.

"The intent behind the change" according to one insider ( "is to close an estimated $300 billion gap between taxes paid versus what is owed. Because a copy of each 1099 is filed with the IRS, the change seeks to close this gap ... by making it more difficult for companies to underreport revenue ..."

What?! Corporations don't report all their income and don't pay all their taxes? Gee I thought only unlicensed contractors, itinerant painters, undocumented immigrants, landscapers and handymen who give discounts for cash made up the under ground, under the table, cash only please economy. I wonder how much of that $300 billion gap is the drug and insurance companies as opposed to the little guys not reporting all the cash they take in.

I'm trying to make a point here that a lot of Americans and maybe especially corporations cheat on taxes and aren't that different from the Colonial gun runners and tax evaders the Fourth Amendment was intended to protect.

But as a passing aside maybe doing all the work it would require my company to file a few hundred more 1099s would be worth it if it forced Shell Oil, Apple and Pfizer to pay their taxes.

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