The Senate is reconsidering their harsh 1099 legislation with a vote tomorrow. Here’s a run down of what might change.

The Senate will vote Sept. 14 on giving small businesses relief from a new paperwork burden imposed by health care reform.

That law requires businesses, beginning in 2012, to file 1099 reports with the IRS any time it spends more than $600 a year with another business on goods and services. The provision was included as a way to help pay for health care reform – the theory is that third-party reporting of sales will make businesses less likely to hide income from the IRS.

Businesses currently have to file 1099 forms only for services supplied by unincorporated contractors. Health care reform’s significant expansion of the 1099 requirement has prompted howls of protest from small businesses, who fear they will be swamped by the additional paperwork.

Senate Majority Leader Harry Reid, D-Nev., has scheduled votes on Sept. 14 on two amendments to the Small Business Jobs Act that would address the 1099 requirement in different ways.

An amendment by Sen. Mike Johanns, R-Neb., would repeal the requirement.

A competing amendment by Sen. Bill Nelson, D-Fla., would exempt businesses with fewer than 25 employees from the requirement and would raise the dollar threshold for reporting purchases from $600 to $5,000. Nelson’s amendment also would exempt credit card purchases from the 1099 requirement, something the Treasury Department already was planning to do.

Nelson’s amendment isn’t good enough for the National Federation of Independent Businesses.

“We don’t need an alternative,” said Susan Eckerly, senior vice president of the NFIB. “We need full repeal.”

For more information, see  www.uschamber.com

A few months ago, a key piece of legislation was uncovered in the 1000 + page health care bill. It states that businesses have to give 1099 tax forms to vendors for services and goods worth $600 or more. People are UP IN ARMS about this hidden measure. It will pay for a nice little chunk of health reform, $19 billion over 10 years. No wonder it was sandwiched in the middle, where it took months for people to find.

Business people have raised enough hell for legislatures to take a second (or first) look at the measure. They’re taking two positions on it. Get rid of it all together, or modify it. The modification raises the $600 reporting mark to $5000. Businesses with less than 25 employees would be exempt. And all credit card transactions would be exempt too.

The Senate will hold a vote on the amendment on September 14th. 

For more detailed information on the amendment, take a look at the New York Times article by Robb Mandelbaum.