Congressmen Introduce Bill to Limit Form 1099-K ‘Overreach’

Reps. Bobby Schilling (R-Ill.) and Aaron Schock (R-Ill.) have introduced a bill to prohibit the U.S. Internal Revenue Service (IRS) from implementing a new tax-reporting requirement for small businesses to reconcile their Form 1099-K (PDF) reports from outside providers with their own internal reports.

The 1099-K Overreach Protection Act targets the requirement for merchant card and third-party network payers to report the proceeds of payment card and third-party network transactions. The requirement was part of the Housing and Economic Recovery Act of 2008.

Form 1099-K will show all credit transactions within a merchant’s business for the year. Schilling and Schock say the IRS is using the form to add extra burdens on small business tax forms by requiring them to reconcile the report with internal numbers, and that several common types of transactions can lead to discrepancies.

“This is an unnecessary IRS requirement that will only lead to more accounting headaches for businesses,” Schock said in a statement. “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. When you take into consideration all of the types of merchant transactions that occur between a customer and a small business all this adds up to unnecessary administrative costs, a new accounting burden, and more time away from growing their business. At a time when there is still record unemployment, adding another job killing regulation on small businesses is not the right solution.”

The 1099-K Overreach Protection Act prevents the IRS from using the 1099-K data to require new reconciliatory calculations for small businesses. Sen. John Thune (R-S.D.) plans to introduce similar legislation in the Senate.

LAST UPDATED 2/9/2012
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