government relations help desk

Posts Tagged ‘Taxes’

Community Paper Case to Repeal the 1099 Paperwork Tsunami

In Competition, Healthcare Reform, Rules&Regs, Testimony, Uncategorized on March 18, 2011 at 12:11 pm

For countless months, we have joined with our peers across the small business community in calling for full repeal of the new 1099 reporting provisions. We have made our case to the House and Senate, and gradually they began to listen.

Sort of.

Currently all sides say they want to repeal this job-killing paperwork nightmare. Several bipartisan votes have demonstrated that. Competing legislation has now moved from the Senate to the House and the House to the Senate…and even more repeal language has been attached and will soon be offered to larger pieces of unrelated legislation. Great, freestanding and pin-the-tail-on-the-donkey are both ways to get the job done.

But the Lingering Problem: Repeal is still not legally complete! Please Click Here on Our Industry Action Page to let your House and Senate Members know that you appreciate their efforts so far — BUT it’s now time to Finally Repeal the 1099 Paperwork once and for all!

The Free Community Paper Case for Repeal the 1099 Paperwork Tsunami has been made to Congress from the unique perspective of our industry — as well as part of a much broader coalition of small business groups. For the most comprehensive analysis of the impact to Our Industry, read excerpts of our formal Comments to IRS and Treasury as follow:



RE:  Notice 2010–51

Information Reporting Under the Amendments to Section 6041 for Payments to Corporations and Payments of Gross Proceeds and With Respect to Property

The Association of Free Community Papers (AFCP) and Mid-Atlantic Community Papers Association (MACPA) submit these comments to the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) on behalf of the united Free Community Paper Industry (Community Papers)1 in response to Notice 2010-51, regarding guidance concerning new requirements with respect to the reporting of payments made in the course of the payor’s trade or business.  Specifically, the Treasury and the IRS have asked for comments regarding the implementation of the expanded information reporting requirements included in the Patient Protection and Affordable Care Act of 2010, Pub.L.No. 111-148, 124 Stat. 119 (PPACA).

Community Papers are concerned about the increased complexity and cost this new requirement will place on small business generally, and on our hometown publishers and their community advertisers specifically.  The potential reach of the new reporting requirement is vast, requiring small businesses to report almost every business-to-business transaction including commerce-driving advertising services.

It is our understanding that the goal of this exponential expansion of reporting requirements is to increase the aggregate amount of income believed to be currently underreported by some in the business community, and thereby bolster collection of the sum total tax revenue believed to be owed.  Even in theory, it is generally understood that these new burdens will fall on already compliant small business taxpayers.  As a matter of practice, there are concerns even within Treasury and IRS that a tsunami of new 1099s will not provide any practicable new information, or whether this tidal wave of data can even be purposefully integrated into current data analysis systems.

Community Papers appreciate the fact that Treasury and the IRS have requested ways to minimize the expanded burdens on our small business communities. We note that attention has been given to, and comment sought on, specific concerns including duplicative reporting, disproportionate burdens among types of taxpayers and businesses associated with implementation and compliance, as well as the privacy concerns arising from the new, widespread wave of soliciting taxpayer identification numbers (TINs).

It is our strong and considered belief that these new reporting requirements will wreak havoc beyond even that currently contemplated, with a net return to Treasury and IRS far less than hopefully projected. Plainly stated, this costly scheme will do far more harm than good, and we will continue working with small business peers across industries united for full repeal measures before Congress. Here, however, we plead for the specific remedy of exempting advertising expenses from 1099 reporting at the new $600 threshold.

Community Papers offer five (5) concrete reasons why advertising — a commerce-driving, routine business operating expense — should be exempt from the duplicative 1099 reporting and the requisite and potentially hazardous TIN swapping triggered by $600 of services rendered over the course of the year:

• First, in practical terms with tax revenue objectives in focus, 1099 reporting on advertising will not provide any bottom-line information about any unreported revenues from client advertisers. The avalanche of requests for TINs, and subsequent cross-filings of 1099s will not reveal whether or not our advertisers are underreporting the income generated by their own, respective businesses. The overriding goal of making sure — or finding out whether — the plumber, the pizzeria or the seasonal lawn mowing and snow plowing service is reporting all of their income and paying their taxes will not be advanced one penny by this futile enterprise.

• Second, advertising expenses are not even remotely likely to involve any real compliance difficulties. These are tracked by front-end systems, generating a trail of payment and receipts, and presumably our clients already claiming advertising as a deduction.

• Third, a $600 threshold, or any other nominal and arbitrary baseline, could lead to the consolidation of advertising with fewer, larger firms — or even a reduction in advertising by small business altogether. Advertising generates a proven multiplier effect on economies, and since each ad dollar lost compounds to a net economic loss of 4 to 10 times or more, this would be a disaster for small business generally, our hometown publishers particularly — and quite possibly a net loss to Treasury and IRS.

• Fourth, given that TINs are unique, very real and powerful identities — the object of illicit demand and subject of theft and abuse — the forced, widespread unprotected sharing among all businesses based solely on a small dollar amount of aggregate yearly expenditures, would in other applicable contexts be scorned as dangerously promiscuous.  The magnitude of compulsory risk for our industry, and all of small business, is chilling.

• Fifth and finally, disproportionate burden:  Estimates of compliance across industries puts new 1099 reporting at multiples of ten (10) upwards past fifty (50) times current levels — Community Papers, anticipating formal requests for TINs from even our smallest and occasional advertisers, will see increases one thousand-fold (1,000x) and even higher at larger publications.  We are in the business of helping businesses generate business, and over the course of a single year even the smallest hometown publishers provide advertising services totaling $600 to several hundred and more micro and small businesses, in addition to others. For larger community paper publishers, that could run into the tens of thousands over the short span of fifty-two weeks.

The presumption behind these exponentially expanded reporting measures is the hopeful expectation that disclosure of this tsunami of new information will translate into significantly reduced illegal tax avoidance.  At the same time, there is a considerable concern bridging industry and government regarding the resulting paperwork burden and security risks, especially for small businesses.  Treasury and the IRS seek comment and have authority to issue rules exempting certain expenses unlikely to involve compliance difficulties, such as advertising, and in particular print advertising.

For the reasons detailed above, Community Papers urge the exemption of advertising from the duplicative 1099 reporting and the requisite and potentially hazardous TIN swapping triggered by $600 of services rendered over the course of the year.



1 The Association of Free Community Papers (AFCP) and Mid-Atlantic Community Papers Association (MACPA) are joined by the following state and regional trade associations of Free Community Paper Publishers:  Midwest Free Community Papers (MFCP), Southeastern Advertising  Publishers’ Association (SAPA), Community Papers of Florida (CPF), Community Papers of Michigan (CPM), Wisconsin Community Papers (WCP), Texas Community Newspaper Association (TCNA), Community Papers of Ohio and West Virginia (CPOWV), Free Community Papers of New York (FCPNY). Collectively, the Industry includes 2,673 hometown publications with a combined, audited circulation 65,187,292, and a small business client base, investing at least $600 a year, well into the millions — all to grow our inter-dependent economies.