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Washington, DC, United States (AHN) – Congress is still seeking a way to repeal the burdensome 1099 law that requires businesses to file a 1099 for every vendor from which it purchases $600 or more worth of goods or services during the year.

House Ways & Means Committee members will take up the issue Thursday when they mark up a bill that would repeal the language that created the bill last year.

Congress included the 1099 requirement in the health reform bill it passed last year as part of its effort to make the new bill revenue neutral. The argument for requiring businesses to file a 1099 for purchases of that amount was that it would add to federal revenue by catching businesses that weren’t reporting all their income to the IRS.

Under current law, businesses are only required to file 1099 forms to document non-wage income to individuals that perform work as independent contractors. However, the expanded provision requires any business or individual with business income to file a 1099 form for any vendor from whom they purchase more than $600 in goods and services per year.

Proponents of the law claim that the 1099 requirement would bring another $2 billion per year into federal coffers. That estimated amount of money is crucial to funding for the health reform act.

However, critics argue that it would cost businesses too much money to file 1099s for so many vendors and that it might cost small vendors customers as businesses try to cut paperwork costs by consolidating purchases with large vendors to avoid having to create so many 1099s.

An estimated 40 million taxpayers would be affected by the requirement, according to estimates by the IRS’ National Taxpayer Advocate, which said the compliance burden would be disproportionate compared to any improvement in tax compliance.

The requirement would force businesses to obtain the taxpayer identification numbers of all vendors including utility companies, office supply stores and even big box stores from which many small businesses buy computers, office furniture or other supplies during the course of the year. That would presumably also include chain gasoline stations if a business deducted automobile mileage or had delivery trucks and money spent on mailing catalogs, letters or packages through delivery services such as the post office, UPS or Fed Ex.

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