Repeal 'onerous' IRS rule: Lawmakers

By Catherine Clifford, staff reporter

NEW YORK (CNNMoney) -- Now that House Republicans have had their token show-vote on the health care law, Congress is turning its attention to one small provision that everyone agrees should be repealed.

On Thursday, three Senate Democrats wrote to House Speaker John Boehner urging the House to vote to repeal the so-called 1099 provision, a hated IRS rule that imposes new paperwork burdens on businesses.

The senators said they "are confident that the Senate can quickly act" on the repeal once the House has moved it along.

"The [1099 provision] is particularly onerous for small businesses ... who cannot afford to employ extra lawyers and accountants to comply with the new rules," Senators Ben Nelson, Maria Cantwell and Amy Klobuchar wrote.

Beginning in 2012, all companies will have to issue a 1099 IRS form not only to contracted workers, as they now must do, but also to individuals or corporations from which they buy more than $600 in goods or services in a year.

The 1099 form is used to document income for individual workers other than wages and salaries: Freelancers get them and businesses send them out.

Under the health care law, the 1099 form would be used to track payments for services and tangible goods. Also, it requires that 1099s be issued not just to individuals, but to corporations as well.

The new mandate has drawn sharp criticism from the business community, politicians and even President Obama. In November, President Obama pledged that he would support a repeal of the provision.

Republican Rep. Dan Lungren of California introduced a bill, called the "Small Business Paperwork Mandate Elimination Act of 2011," to repeal the provision on the House.

"The engine of our economy is small business -- and we cannot afford to do anything that would stall our economic recovery," said Lungren in a written statement. "We should be supporting policies that contribute to job growth, not imposing yet another new government mandate on the backs of small business owners."

Last fall, Congress was unable to muster enough votes to repeal the provision -- once in September and again in November.

The goal of the provision was to raise revenue to pay for health care reform. The government misses out on an estimated $300 billion each year from tax underpayment.

The repeal would cost $19.2 billion between 2011 and 2020, according to an estimate from the Joint Committee on Taxation. To top of page

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