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SMBs Relieved as IRS Backs Down on 1099k Reconciliation Provision

SMBs Relieved as IRS Backs Down on 1099k Reconciliation Provision

SMBs Relieved as IRS Backs Down on 1099k Reconciliation Provision

In response to the outcry from small businesses and the U.S. Chamber of Commerce, the IRS has announced that it will not enforce a provision that would have required businesses to reconcile their gross sales with payment card receipts.

Under Section 6050W of the Internal Revenue Code, added by Section 3091 of the Housing and Economic Recovery Act of 2008, the IRS now collects the new 1099K document which shows all the credit transactions performed by a merchant during the year, from third-party payment sources, including credit card companies. The IRS recently added a line, 1a-e, which would further require businesses to reconcile their own internal data with the data on the 1099K document.

Although the process might appear simple enough, for many small businesses, the process could be an extremely complicated and expensive undertaking.

Congressman Aaron Schock (R-IL) said, “This is an unnecessary IRS requirement that will only lead to more accounting headaches for businesses. My concern is that the IRS is asking for flawed information from small businesses by requiring them to reconcile their internal numbers with that of third party entities.” He went on to say, “At a time when there is still record unemployment, adding another job killing regulation on small businesses is not the right solution.”

On February 2, Congressmen Schock and Bobby Schilling (R-IL) introduced the 1099K Overreach Prevention Act to prohibit the IRS from implementing the onerous reporting requirement.

The 1099K Overreach Prevention Act was subsequently introduced in the Senate by Senators John Thune (R-SD) and Maria Cantwell (D-WA). In a letter sent to the National Federation of Independent Business last Thursday, IRS Deputy

Commissioner Steven Miller said the agency will not require businesses to reconcile their records for the 2012 tax year. “Nor do we intend to require reconciliation in future years,” he went on to say.

National Federation of Independent Business CEO Dan Danner said, “The many complications in our country’s tax code often put the small-business owner at a disadvantage with government compliance.” The NFIB estimates that businesses with fewer than 20 employees currently pay almost $1,600 per employee in IRS compliance costs.

Sources:

“IRS Says It Will Not Chase 1099K Reports from Businesses”, February 10, 2012, Sheryll Poe http://www.freeenterprise.com/economy-taxes/irs-says-it-will-not-chase-1099k-reports-businesses

“IRS Agrees with NFIB Regarding 1099-K Reporting Requirements, Responds by Eliminating Small-Business Compliance”, February 9, 2012, Jennifer Cooper http://www.nfib.com/nfib-on-the-move/nfib-on-the-move-item?cmsid=59402

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