A somewhat buried, three-paragraph pay-for in last year’s new healthcare legislation has been approved by the Senate for repeal, much to the relief of the nation’s small businesses and their advocates.  The provision would have required companies to report to the IRS payments of more than $600 per year made to any vendor, creating a compliance nightmare for small businesses in particular. 

Initially designed to both fight tax fraud and raise money to implement healthcare reform, the provision very quickly became unpopular with both parties once the potential ramifications for small businesses became apparent.  Given that the House already passed it and the Senate’s 87 to 12 vote to do the same just last week, the repeal bill will now go to the President for his consideration. 

President of the National Small Business Association (NSBA) Todd McCracken said in a recent statement, “NSBA applauds the efforts made in the Senate and House to repeal this huge thorn in the sides of America’s small businesses.  After a year of political wrangling over how to offset the cost (of healthcare reform) despite broad support of repeal, this was clearly a vote in support of small business.”

Currently, businesses must file a 1099 form only for freelancers and other service providers who are not incorporated and who they pay more than $600 per year, the goal being to ensure these workers pay taxes that would otherwise be withheld by businesses if they were regular employees.  The new provision would have expanded such reporting to also include companies, as well as goods and services.  According to the NSBA, small firms could very well have to increase their 1099 reporting from an average of 10 to 86 if the provision is not repealed, creating a tremendous burden on them both administratively and financially.

Shortly after the Senate's repeal language was approved, the White House signaled the President’s intention to sign the new bill stating, we are “pleased Congress has acted to correct a flaw that placed an unnecessary bookkeeping burden on small businesses.”  According to CNN reporter Ted Barrett who has been covering this issue closely, “multiple sources from both parties said they expect the president to sign the repeal” as well.