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Washington Watch - May 26, 2010

New Law Increases Paperwork for Self-Employed Over A Thousand Percent

Many of the nation’s entrepreneurs are about to become more familiar with IRS Form 1099. According to a new 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 new survey by the National Association for the Self-Employed (NASE) found that the self-employed and micro-businesses (those with fewer than 10 employees) are overwhelmingly expecting this new regulatory burden to greatly or somewhat increase the amount they spend on tax preparation.

The Form 1099 reporting system has historically been utilized for payments made to independent contractors. According to NASE’s survey, micro-businesses reportedly received an average of four Form 1099s from clients or customers and issued an average of two Form 1099s to contractors in the most recent tax year. Under the new expanded regulation, small-business owners have estimated that they will have to issue roughly 27 Form 1099s, mostly to large corporations. This is a 1250% increase in the amount of paperwork that will be required of small-business owners come 2012.

“To the mom and pop shop, time is money, and this new regulation is going to require plenty of both,” remarked Kristie Arslan, NASE executive director (legislative offices). “The bottom line is that the Form 1099 expanded reporting requirement affects companies small and large, increasing the number of forms issued and received many times over.”

As part of the new expanded Form 1099 reporting requirement, businesses will be required to obtain accurate Taxpayer Identification Numbers (TINs) from all qualifying vendors. Should the business owner be unable to do so, they would be required to withhold a portion of that vendor payment and send it to the IRS. With over 40 percent of survey respondents still preparing their taxes on their own, this added administrative workload will significantly increase the time business owners spend on paperwork and/or force them to hire an accountant, adding to the cost of doing business in this difficult economic time.

For more information, including survey results, click here.

National Small Business Week

According to the Small Business Administration (SBA), approximately 60 percent of Americans own or work for a small business. The NASE is teaming up with the SBA again to sponsor National Small Business Week 2010. For nearly fifty years, one week has been set aside annually in order to honor the contributions of the nation’s small business community. The NASE works with the SBA to help increase access to capital and lends our support to federal initiatives that have proven helpful to micro-business growth.

“This week, we celebrate the role of entrepreneurs and small businesses in our national life. They are the engine of our prosperity and a proud reflection of our character,” said President Barack Obama. “A healthy small business sector will give us vibrant communities, cutting edge technology, and an American economy that can compete and win in the 21st century.”

The full text of the President’s National Small Business Week proclamation can be found at:

"This past year has seen a new social and political focus on the importance of micro-businesses and the self-employed,” said Robert Hughes, NASE president. “Small Business Week offers a formal opportunity to join in recognizing the innovative potential of the largest business type in the nation – self-employed firms."

For information on National Small Business Week, please visit

President Obama Introduces Legislation To Cut Unnecessary Spending

Legislation recently sent to Congress by President Barack Obama would establish a new tool to reduce wasteful or unnecessary spending. The Reduce Unnecessary Spending Act of 2010 would allow the President to submit a package of rescissions shortly after a spending bill is passed. Congress would be required to consider the President’s recommendations as a package, without amendment, and with a guaranteed up-or-down vote within a specified timeframe. The Act will empower the President and Congress to eliminate unnecessary spending while discouraging waste in the first place, and is part of a larger effort the President has undertaken to cut wasteful spending.

Health Care Law Authorizes Federal Funding For School Health Centers

The Patient Protection and Affordable Care Act (PL 111-148) gives the federal government a role in public school-based health care centers for the first time. The movement to embed health care centers in public schools, in order to provide physical and mental health services to students in the place where they spend most of their day, has grown over the past three decades with funding support from states, localities and private foundations.

There are currently 2,000 school-based centers serving 1.7 million students in 44 states. Supporters say that while there are centers in relatively few of the nation’s 99,000 public schools, the centers are important for lower-income districts.

While the centers differ, they often include providers such as nurse practitioners, who can give immunizations, manage chronic conditions like asthma, conduct physicals and make referrals. Centers also may have psychologists on staff, or offer dental services. Centers often serve children from low-income families who qualify for Medicaid but are on waiting lists for care, those without insurance or with high deductibles, or undocumented immigrants.

The House version of the health reform legislation authorized $50 million for fiscal year 2011 and beyond for the centers, however the Senate version of the bill, which became law, did not specify a dollar amount for school-based centers. Advocates are working to get a concrete amount of funding from the appropriations subcommittees. In addition, the law provides $200 million over four years to the centers for capital improvements through grants. While supporters say that the real need is funding for ongoing operations, they hope there is flexibility in the grant regulations on how funds can be used and that minimum grant levels are low to allow the smallest centers to apply.

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