Squeeze That Lemon

Within the IRS is an agency called the Taxpayer Advocate Service. Here’s what it is, according to the IRS.gov website:

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

In its latest news release, the TAS discusses a teeny-weeny Easter Egg buried in the enormous health-care bill foisted upon us by the Democrats earlier this year. It requires businesses to file 1099-MISC forms to all vendors from whom they have purchased over $600 worth of goods during the previous tax year.

We read:

[A] new reporting requirement contained in the Patient Protection and Affordable Care Act may impose significant compliance burdens on businesses, charities, and government agencies. Beginning in 2012, all businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year. To meet this requirement, these businesses and entities will have to keep track of all purchases they make by vendor. For example, if a self-employed individual makes numerous small purchases from an office supply store during a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases. The provision will have broad reach. According to a TAS analysis of 2009 IRS data, about 40 million businesses and other entities will be subject to the new requirement, including roughly 26 million non-farm sole proprietorships, four million S corporations, two million C corporations, three million partnerships, two million farming businesses, one million charities and other tax-exempt organizations, and more than 100,000 government entities. All of these nearly 40 million businesses and other entities are subject to the new reporting requirement.

What on earth does this have to do with healthcare? Why nothing, of course. It was just slipped into this massive bill in an attempt to make the Democratic leadership’s accounting jiggery-pokery add up to something they could pass off as “deficit-neutral”. Despite the onerous burden it imposes, very few people even realized it was in the gigantic bill at all, until recently.

Why is that? Well, one reason is that, aside from being tucked away in Section 9006 (b) of the ponderous Affordable Care Act, the new tax requirements aren’t even made explicit at all, but involve modifications-by-reference to Section 6041 of yet another bill, the Internal Revenue Code of 1986.

Want to see how it works? OK, first open this link to the Affordable Care Act itself. (I hope you have plenty of RAM, and a broadband connection.)

Got it? OK, now go to page 737. In Section 9006 we find the following:

(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.—

Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended—

(1) by inserting ‘‘amounts in consideration for property,’’ after ‘‘wages,’’,

(2) by inserting ‘‘gross proceeds,’’ after ‘‘emoluments, or other’’, and

(3) by inserting ‘‘gross proceeds,’’ after ‘‘setting forth the amount of such’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after December 31, 2011.

In fairness, I have to admit that it’s easy to see how even someone as studious, intelligent, and perspicacious as the average member of Congress could skim right past that. To understand just what it means, we have to pull up yet another heaping helping of American exceptionalism, the Internal Revenue Code of 1986.

Skipping lightly to Section 6041 (a), we read:

(a) Payments of $600 or more

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042 (a)(1), 6044 (a)(1), 6047 (e), 6049 (a), or 6050N (a) applies, and other than payments with respect to which a statement is required under the authority of section 6042 (a)(2), 6044 (a)(2), or 6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.

Applying the modifications specified in H.R. 3590 Section 9006 (b), the revised version becomes:

(a) Payments of $600 or more

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, amounts in consideration for property, premiums, annuities, compensations, remunerations, emoluments, or other gross proceeds, fixed or determinable gains, profits, and income (other than payments to which section 6042 (a)(1), 6044 (a)(1), 6047 (e), 6049 (a), or 6050N (a) applies, and other than payments with respect to which a statement is required under the authority of section 6042 (a)(2), 6044 (a)(2), or 6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gross proceeds, gains, profits, and income, and the name and address of the recipient of such payment.

And there you have it, dear Reader: just as promised at the dawn of the Obama imperium, a new era of transparency in government.

What’s that? You say you’re vexed that the President, as he ginned up support for this legislative apotheosis, this visionary, cost-reducing monument to America’s moral rectitude, never mentioned that amongst its many blessings it would impose a staggering new bureaucratic and financial burden upon 40 million of America’s businesses, both great and small?

Don’t be ridiculous; it was all made perfectly clear in advance by the Speaker of the House, well before this enlightened and long-overdue bill was passed (passed with, if memory serves, unanimous Congressional acclaim, and the enthusiastic support of every American citizen). Remember? Ms. Pelosi patiently explained it to us back in March, when a querulous voice was heard to rise briefly above the din of popular acclamation. She said:

“But we have to pass the bill so that you can find out what is in it.”

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3 Comments

  1. JK says

    This is probably a dumb question but I’m gonna ask anyway. Seeing as how you Malcolm are obviously familiar with all this legislative bovine excreta.

    Are the Medicare and Medicaid institutions, operated and staffed by the Federal Gubmint considered vendors?

    Posted July 9, 2010 at 10:21 pm | Permalink
  2. Malcolm says

    I have absolutely no idea.

    Posted July 9, 2010 at 10:23 pm | Permalink
  3. MIke Z says

    WTF!!?!?!

    – M

    Posted July 14, 2010 at 7:52 pm | Permalink