Top Democrat backs 1099 requirement repeal

NEW YORK (CNNMoney.com) -- Top Democrats are uniting with Republicans in a show of support for small business owners: Senate Finance Committee Chairman Max Baucus, D-Mont., said Friday that he will introduce legislation to repeal the expanded 1099 reporting requirements set to take effect in 2012.

"I have heard small businesses loud and clear and I am responding to their concerns," Baucus said in a prepared statement. "Small businesses are the backbone of our economy in my home state of Montana and across the country, and they need to focus their efforts on creating good-paying jobs -- not filing paperwork."

The measure was adopted in March as part of the massive health care reform law, but only came to light months later when advocacy groups drew attention to the provision. Starting in 2012, businesses will be required to issue 1099 tax forms not only to contracted workers (as they already do) but also to any individual or corporation from which they buy more than $600 in goods or services in a year.

Tax experts say that change would require business filers -- including freelancers and sole proprietors -- to issue millions of new 1099 forms each year.

Business owners say that the change -- intended to raise tax revenue by increasing compliance -- will swamp them with an onerous flood of paperwork. Republicans have lead the charge for repeal of what they called a "job-killing" requirement. National Taxpayer Advocate Nina Olson warned that the burden of filing all those additional forms "may turn out to be disproportionate" to the benefit it will deliver.

In September, Sen. Mike Johanns, a R.-Neb., proposed a measure to repeal the requirement entirely. Sen. Bill Nelson, a Florida Democrat, countered with a more moderate proposal at the same time, but neither measure passed.

Since then, however, President Obama indicated that he would support a repeal of the measure.

Baucus did not indicate when he plans to introduce repeal legislation. His office did not immediately return a call seeking further comment.

Small business advocates have been lobbying hard to get the measure repealed.

"We are pleased to see that our leaders on both sides of the aisle are willing to do the right thing for our nation's job creators," Dan Danner, president and CEO of National Federation of Independent Business, said in a prepared statement. "Small business should be the one thing that unifies our leaders as we work to come out of these difficult economic times."