One of the keys to surviving an avalanche is to stay on your feet as long as possible and move to the side as quickly as you can. That advice may not be enough for the close to 40 million small business owners in the U.S. who are about to be buried in paperwork thanks to an obscure provision hidden inside the nearly 2,000 pages of the Health Care Reform Bill.
Beginning in 2012, the provision requires them to file tax forms for every vendor that sells them more than $600 in goods.
In a rare alliance, small business is not alone in questioning the merits of the requirement. The IRS also sees the new law as creating a tsunami of paperwork that threatens to strain the resources of the tax collecting arm of the federal government.
In a 241-154 vote split down party lines (Democrats opposed, Republicans for), the House of Representatives rejected a bill on Friday (July 30th, 2010) that would have removed the provision from the Health Care code. Opponents of that bill claim the requirement will result in an extra $1.9 billion dollars in tax revenue per year over the next decade.
Almost $2 billion a year sounds like a large number to us tax payers, but in the eyes of a federal lawmaker, the number is practically insignificant. If you thought of the yearly Social Security budget as one dollar, you would have to take a penny and chop it into four pieces, and then only 1 of those 4 pieces would represent the $1.9 billion “windfall” created by this burden on small businesses. And that’s just for Social Security. If instead you thought of the yearly federal budget as one dollar, you would have to cut the penny into so many pieces that they would no longer be visible to the human eye.
And, of course, the $1.9 billion dollars represents only an estimate of the amount to be collected, or a “guess at the gross”. With the IRS themselves claiming that this newly discovered provision of Health Care Reform will place an undue burden on their organization, one begins to wonder if this is yet another tax revenue scheme that will actually result in a deficit once the final accounting is done due to too much optimism on the amount collected and not enough pessimism on the cost to collect it. I would not be surprised if after accounting for the added cost and lost productivity for both small business and the IRS, this provision resulted in $500 million less per year instead of $1.9 billion more. Where did I come up with my $500 million loss? I used the House of Representatives approach and “guessed at the net.”
Are these really the people you want to depend on for your retirement? If you agree that you can do a better job for your family than Congress, call Devers Financial Group at 830.743.9713 or contact us online and together we can put control of you and your family’s financial future back in the hands of someone who knows what a dollar is worth.
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AP story on the new provision: Paperwork nightmare: A struggle to fix new law
August 5, 2010 at 5:50 pm
nice post. thanks.