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Critics say repeal of Form 1099 rules will create a lot of havoc for the money it raises, with some coin dealers saying they would have to file thousands of the forms every year. Gold-related businesses may be affected m..
12 Dec 2010
By Allen Sykora of Kitco News
http://www.kitco.com
(Kitco News) - Sen. Mike Johanns (R-Neb.) expressed confidence late Thursday that the U.S. Congress will eventually repeal controversial Form 1099 reporting rules, although this may not happen until 2011.

The Form 1099 rules, which make up a tiny portion of health-care legislation passed in the U.S. earlier this year, are opposed by coin dealers and a wide range of other businesses, who say they will create excessive paperwork.

Starting in 2012, Section 9006 of the Patient Protection and Affordable Care Act requires entities to file a Form 1099 with the Internal Revenue Service whenever they make transactions paying out $600 to another party. The measure does not create a new tax, but was meant to establish a paperwork trail to force those who should be paying taxes to do so, if they aren’t already.

Critics, however, say it creates a lot of havoc for the money it raises, with some coin dealers saying they would have to file thousands of the forms every year. Gold-related businesses may be affected more than most since the $600 reporting threshold is less than half of the current value of a single ounce of gold.

“I think everybody is in agreement really, which is amazing around here, that it should just be outright appealed,” Johanns said in an interview with Kitco News. “There is more debate of how do we pay for it, because it does have a fiscal impact.”

Johanns introduced amendments to repeal the new Form 1099 rules that were defeated in early autumn and again in late November. On the first go-around, a Democratic proposal, which also failed, would not have eliminated the rules but instead would have increased the reporting threshold, such as raising the $600 limit to $5,000.

“When we started out, the response of the folks on the other side of the aisle—my colleagues on the Democratic side—was kind of along the lines of, ‘well, we’ll tweak it here, and we’ll tweak it there, and that will be good,’” Johanns said. “Businesses all across the country weighed in and said that is not good and this is still going to be a terribly onerous paperwork requirement for no purpose.”

Then last month, both Johanns and Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, introduced amendments for full repeal. The only difference was on what to do about the estimated $17 billion to $19 billion in new funding over a decade that purportedly would be lost by the repeal. Johanns’ proposal called for this to be replaced with other unspent federal accounts, while Baucus’ plan had no budgetary offset. Neither got the 67-vote super majority needed to pass.

“He (Baucus) and I talked while that vote was going on, and we both came to an understanding that we have to do whatever we need to (and) work together and get rid of this,” Johanns said. “And we have done that. We have continued the discussions between our staffs.”

Baucus was not available for an interview.

At one point, Johanns said, he thought a repeal measure would make its way into a bill on continuing the so-called Bush-era tax cuts. If so, this may have resolved the Form 1099 matter by Christmas, since Congress must vote to continue tax cuts before it adjourns or else they end.

“At this moment, I don’t believe that is going to be the case,” Johanns said of the likelihood of the new Form 1099 rules being nixed yet this year. “But I’m not panicky about that. I do think we’re going to get this done.”

For now, he said, Congress simply has other pressing matters that must be handled in the next week before the Senate majority leadership plans to adjourn ahead of Christmas. Businesses do not have to undertake the new reporting requirements for another full year, until January 2012.

“So I don’t think there is a downside for businesses that this is going to drag into next year,” Johanns said. “But I’m anxious to get it done so businesses know that they can forget about this.”

Johanns said the business community is “up in arms” over the Form 1099 rules as they currently stand.

“And I don’t blame them,” he said. “It’s a stupid requirement.”

By Allen Sykora of Kitco News; asykora@kitco.com


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