Marathon Pundit: Schock: IRS 1099-K tax reporting provision strikes out

Sunday, February 05, 2012

Schock: IRS 1099-K tax reporting provision strikes out

Illinois River in Peoria Heights

Writing for FreeEnterprise.com, Rep. Aaron Schock (R-IL), write about the latest red tape creation from Washington, the RS 1099-K tax reporting provision.

Schock represents Illinois' 18th congressional district, which covers Peoria and the rural counties surrounding it.

Unintended consequences can be as quirky as Zooey Deschanel sometimes. But when it comes to the Internal Revenue Service (IRS), quirky means job creators have to spend more time and money ensuring the Feds don’t come knocking on the front door. But following in the illustrious footsteps of 3% withholding and the Obamacare 1099 reporting provision, the IRS has come up with a new tax reporting requirement that will be placed on small businesses next year unless Congress acts now.

Small business owners are just beginning to learn about the 1099-K tax reporting provision. This new requirement requires the IRS to collect a new document known as a 1099-K from third-party payment entities, such as credit card companies, which will show all the credit transactions within a merchants business for a given year. Unfortunately, the IRS is using the 1099-K to add additional burdens on small business tax forms by requiring them to reconcile this report with the merchants own internal numbers, which was NOT the original intent.

While on the surface this may seem like a simple task, as you dig deeper it becomes immensely more complicated and expensive for our employers.

For example, one of the most commonly asked questions after you swipe your debit card is if you want cash back. The withdrawal of additional cash on top of the purchase price of the sale overstates the overall sale in the eyes of the credit card company. This leads to the IRS asking for flawed information since the sale price and the cash back option don’t equal to the small business making more money, it's just distributed differently.