Buried amidst its 2,409 pages, the new health care law appears to contain more surprises for owners of tanning salons and other businesses. Section 9006 requires that an IRS Form 1099 be issued by all businesses to any entity (business or person) providing more than $600 in services or products during a tax year. The new provision begins in 2012, and could result in a lot of additional paperwork
Currently, the tax form tracks payments made to contract workers beyond the scope of a normal employee who is on salary. For example, a business would issue a Form 1099 to an independent contractor or freelancer who provided services. The new application expands the scope of the form, requiring that one to be issued for any combined business transactions that exceed $600 during the tax year – whether that’s an amount paid to a lotion distributor, bed technician, local computer store or PR company.
The new task could be a challenge for busy salon owners. It requires meticulous record-keeping throughout a tax year to track expenses with each individual or company for any combined purchases that may approach the $600 mark.
As with other health-care initiatives (can you say “tan tax?”), the motivation appears to be linked to the potential revenue that could result and aid with the bill’s price tag.
The Senate Finance Committee was responsible for the 1099 revamp. It’s presumed to provide greater accountability in an arena where the tax rules may not have previously been as widely adhered to or enforced. According to the IRS, the feds lose in excess of $300 billion of tax proceeds annually, thanks to unreported income.
Beyond the hassle of salon owners having to track and send out tax forms to stores such as Sam’s Club and Office Max, there’s also the added burden of having to gather taxpayer ID numbers for all the applicable transactions.
An attempt to repeal the new 1099 stipulations is in the works, but whether it will gain traction remains to be seen. The IRS has not released any additional specifics regarding the intricacies of the law or its potential enforcement.
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