All or Nothing – Adding to Regulatory Requirements

More and more I am convinced that it is easier when those who create legislation and regulations in their various forms do so to the point of full impact, all or nothing.  For instance, the proposal at the Federal level to require that the Form 1099 be required for every transactional vendor/buyer relationship exceeding $600 taking place within one year.  This would mean if I spend $600 at an office supply store, they get a 1099 from my small business.  If I hire an individual to work on my website and I pay more than $600, I issue that person a 1099.

No wondering who gets one.  One simple criteria:  more than $600, yes – issue a 1099; less than $600, don’t issue a 1099.  Perhaps in the long run, “easier” for most businesses to determine who gets the 1099 now.

But what about the next level of requirement they are kicking around…The business would be required to VERIFY the taxpayer identification number with the IRS for each entity.  Okay.  If it is not verified by the IRS, then the business would calculate and withhold (and remit) a flat rate tax (think payroll tax amounts).  (Well this sounds very similar to requirements to withhold taxes for vendors in default on taxes. How many small businesses or businesses of any size are able to manage this process effectively?)

Okay.  If I am a small business owner doing my own bookkeeping, what does this mean to my business?  I will be spending more time on paperwork – getting it, tracking it, keeping it, figuring it out, calculating it…OR I will have to invest in bookkeeping and other services OR I will not be complying…OR…I will not be in business.

The “motive” behind these proposed regulations is to close the tax gap – the difference in taxes owed and those collected.  The fair share, fair burden philosophy is fine with me.  But let’s start with a simplification of the tax code and a recognition of the cost of regulations and the confusion that most businesses face in trying to comply honestly with all the regulations.

The burdens of figuring out taxes – payroll, sales and use, property, income – and understanding the ins and outs of what form when and what form for what and who does what for whom and who gets what when and where does this thing go and what is this for and where does this all end and who gets to decide what happens any way and what what what what!!!!!!

The wheels of regulation and taxes continue to spin and the burden continues to grow for the small business.  Small businesses account for the largest percentage of economic growth, job growth and job creation.  They also have the least resources – time, people, money, and experience – to dedicate to these regulations.

Closing the tax gap is about more than issuing forms to every transactional relationship above $600.  It is about making sound legislation which businesses are able to follow and which generate a benefit that outweighs the total cost to the “system” of government and business.  Simplifying the process of determining who gets taxed, in what amount, and all of the related activity is the place to start.  Imposing additional reporting requirements without an ability within the government to provide easy access, timely, accurate information that is more than a yes – that tax payer identification number is verified, a year after you ask…or the third or fourth time you try – is a must.  Further, what will verification actually mean – that the number is “real” or that the number belongs to the person using it?

Legislation seems to be easy to pass when it comes to adding to regulatory requirements without providing meaningful processes, systems, tools, and resources to get the benefit from it.  One more set of requirements.  Another opportunity missed to truly close the tax gap.  My tax dollars at work?!  I want a refund!

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