NLBMDA News - Form 1099 Tax Gap Proposal Not What it Seems

Earlier this year, the President proposed as part of his fiscal year 2010 budget request that all businesses should be required to issue Form 1099's, which report payments made for services rendered, to all their service vendors, including all corporations. The Treasury Department estimated that over a ten-year period, corporations would see the error of their ways and would stop underreporting their income and that tax revenues would increase by at least $9 billion. Congress' Joint Committee on Taxation (JCT) has completed its estimate of the revenue potential of the proposal. The JCT came up with a figure of just over $3 billion. While the state of the economy may have impacted the drop in projected revenue, a two-thirds drop is difficult to explain completely. Perhaps requiring business to flood their vendors with 1099s was not going to generate much revenue because corporations are not underreporting income to the degree alleged. While JCT analysis may dampen enthusiasm for the 1099 proposal, NLBMDA will continue to make Congress aware of the tremendous burden such a proposal would have on businesses for very little return. Original source.