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Washington Watch - July 22, 2010

Thursday, July 22, 2010

National Taxpayer Advocate Submits Mid-Year Report to Congress

National Taxpayer Advocate Nina E. Olson released a report to Congress identifying the priority issues that the Taxpayer Advocate Service (TAS) will address during the coming fiscal year. Olson raised concerns about regulatory burdens faced by small businesses, as well as the implementation of new health laws in regards to the IRS.

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.

The NASE has advocated for years that the IRS find a better ways to interact with small-business owners. Currently, the IRS focus appears to lean toward enforcement versus educational outreach. Ms. Olson recommended an increase in the number of customer service providers within the IRS's call center, in particular because taxpayers have questions regarding health law programs.

“While some enforcement measures are required to prevent inappropriate claims, the overriding objective of agencies that administer social benefit programs is to help as many eligible persons qualify for the benefits as possible," Olson said.

She also expressed concern about new 1099 reporting requirements (see third article, below). 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.

For more detail and to view the entire report, please click here.

To read more about the NASE's tax priorities for Congress, visit our Top Federal Legislative Issues page.


Legislative News: Expiring Tax Cuts Would Hurt Small Biz, Congress Says

It's no secret that Congress has struggled with the decision to extend the Bush tax cuts of 2001 and 2003, set to phase out this year. Facing a growing federal deficit, fiscal hawks have oft-referred to pay-as-you-go rules and encouraged supporters to find offsets. Other lawmakers fret over the decrease in small business hiring  caused by not renewing the tax cuts. For small businesses in particular, an increase in income tax rates would be acutely felt, as self-employed business and personal income are often tied together.

Senate Committee on Small Business and Entrepreneurship Ranking Member, Olympia Snowe, R-Maine, has expressed concern over the effect of tax hikes on small businesses. “It really is important to consider the ramifications of not addressing these issues, given the paltry economic growth that’s occurring in this country and the failure to create jobs based on the policies thus far,” she commented at CQ.com. “So I think it is important to really be very circumspect to what extent we want to allow these tax cuts to expire.”

A new budget law enacted this year, however, may make the opposition's point moot, as it allows the tax cuts to be exempt from pay-as-you-go rules.


Senate Bill Attacks Increased 1099 Reporting Law

In the wake of continued uproar from the NASE and other business groups regarding increased 1099 reporting, the Senate is considering a bill to repeal the provision. It is called the Small Business Paperwork Mandate Elimination Act (S. 3578) and was introduced by Sen. Mike Johanns (R-Neb.) The House companion bill (H.R. 5141) made its debut in April, backed by Rep. Dan Lungren (R-Calif.).

According to a new reporting requirements law set to go into effect in 2012, business owners will be required to submit a Form 1099 for every payment made via check or credit card to vendors for services, inventory or property over $600 annually. A recent survey by the NASE found that the the implementation of this regulatory burden would overwhelmingly increase the amount of time and money spent on tax preparation.

"This mandate forces businesses to waste staff time and resources on paperwork that even the IRS says will likely be of little value," Sen. Johanns remarked in a press release. "One more mandate that stifles small businesses at the same time that Washington urges them to hire workers. For businesses already struggling to emerge from a recession this would be particularly burdensome, requiring government paperwork for common, everyday purchases. It is nothing more than a government-imposed obstacle to economic growth and job creation."

Read more about the Small Business Paperwork Elimination Act here.


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