There’s more than health care in that bill

MAT-SU — Long hours and hard work are the backbone of most successful small businesses. Amid 80- to 100-hour work weeks, many also raise families and — if there’s a rare free moment — there may even be time for a little light reading.

The 2,409 pages of the new health care bill may be a good start, local business proponents advise.

Along with an overhaul of America’s health insurance system, the bill that became law this past March also includes numerous provisions not related to heath care, but vital for business owners to pay attention to, said Jillyan Hendrickson, executive director for the Greater Palmer Chamber of Commerce.

One in particular, called the “1099 provision,” requires small businesses to file 1099 forms with the IRS for every vendor they purchase more than $600 worth of goods or services from in a year. Set to go into effect in 2012, the 1099 provision promises to be a burdensome quagmire of paperwork that could mire small businesses, she said.

“I know that’s been a huge business concern,” Hendrickson said. “When I was in Juneau for the Alaska State Chamber, they had a forum on the health care bill, and they reported this is going to be one of the biggest things that could impact businesses.”

Existing tax law already requires reporting of services purchased at or above the $600 level. Expanding that to include goods — anything from office supplies to food to retail product — creates “a black hole” of paperwork that can bury a small business, said Dianne Woodruff, a Wasilla city councilwoman and accountant.

Woodruff calls the 1099 provision “scary,” and said she’s already fielding concerns from clients about how they can handle the extra reporting and still maintain contact with customers.

“Small businesses are already short-staffed, and the amount of reporting and paperwork that’s going to go into it,” Hendrickson said. “At this point, we have to educate ourselves. This is law right now.”

Another part of the provision that concerns businesses is that the $600 amount is cumulative, said Lynn Carden, executive director for the Greater Wasilla Chamber of Commerce. That means any number of purchases from a vendor, like Office Depot, that add up to more than $600 needs to be reported.

“I think this is going to be huge as people start to navigate through the quagmire of red tape,” she said, adding the complexity of all that’s in the health care bill is another problem. “The government can’t even figure it out themselves, so how can they expect the little guy to do it? Oh, my, our poor bookkeepers. It’s going to be a tremendous amount of upkeep.”

Both Chambers have already begun educating Valley businesses about the potential impacts of the new health care bill, and many more workshops will come in the future, Hendrickson and Carden said.

Because of these concerns, U.S. Sen. Mark Begich, D-Alaska, is co-sponsoring an amendment to the Small Business Jobs and Credits Act that’s moving through Congress now to repeal the 1099 provision.

“Alaska’s small businesses need to be focused on creating jobs and expanding their market share, not filling out paperwork,” Begich says in a press release. “Health reform has many benefits for small businesses and their workers, but the 1099 approach just went too far.”

Begich is one of 12 senators to sign a letter to Douglas Shulman, commissioner of the Internal Revenue Service, pleading for the IRS to find ways to help small businesses, not create more red tape.

“We insist that the IRS develop ways in which small businesses can reduce expected paperwork from this requirement — possibly through consolidating existing forms, for example — and that the IRS report its proposed solution to the Senate Committee on Small Business and Entrepreneurship prior to implementation of the new law,” the letter states.

Woodruff said she’s glad there are those in the Senate who are working to repeal the provision, which basically puts the burden on businesses to do the IRS’s work.

As an accountant, Woodruff acknowledges she probably has a better insight into the tax and reporting requirements and sympathizes with other business owners.

“As a small businessperson myself, I know this is confusing,” she said. “I can only imagine how (confusing) it is for the little mom-and-pop place.”

Regulations like the 1099 provision can also serve as a deterrent for some who may otherwise consider opening a small business, Carden said.

“I think the entrepreneur spirit in Alaska is alive and well, but when you have a good business plan you have to account for that being a lot of it, and it could deter some people,” she said. “If you’re determined, you will do it and you will make it. But still, it could deter some people and could become a huge weight for some current businesses. Are we going to expand? How much more paperwork would that be? How much would that take me away from the counter and my customers?”

Businesses shouldn’t count on lawmakers like Begich changing the provision, either, Carden said. “It’s going to be the law before it’s changed, so we have to take steps to try and understand it and work through it to the best of our ability.”

Anyone with questions about how the health care reform bill could affect their business can contact either the Palmer or Wasilla chambers of commerce.

Contact Greg Johnson at greg.johnson@frontiersman.com or 352-2269.