US Senate is trying to make my firm a lot of money
Posted by Mike Sylvester - 12/22/09 @ 10:57 pm - Filed Under Featured, National Politics
The Health Care Bill that is coming out of the US Senate creates a lot of accounting nightmares for Americans. This bill will end up making my CPA firm a lot of money over the next few years.
I oppose this stupid bill; however, I have to rant about a few of the stupid provisions in this post. First of all realize this monstrosity is not yet law; it has to be reconciled with the House Bill and some of these stupid provisions will likely be removed.
Many of the provisions listed below will make it more expensive to operate a business in the United States.
The first provision is a very damaging provision. Currently if you operate a business in the United States and pay a person who is not an employee $600 or more in a year you are required to issue that person a 1099. A 1099 is a form that reports to the IRS and the individual who received the payments the amount paid. 1099’s are required so that the IRS can attempt to ensure that people who are paid by businesses report this income on their personal tax return and hence pay income tax. Currently a 1099 is required unless you are paying a company rather than an individual. The Senate Health Bill changes that in January of 2012. It makes it so you have to issue 1099’s to everyone regardless of whether they are incorporated. This provision is an accountant job creation provision and will increase the cost of doing business in the United States. If enacted this provision will require all businesses to issue 1099’s to any person or corporation they do business with and pay over $600 in a calendar year. There are many ramifications of this:
- Most small businesses will have to pay an accountant to prepare these forms for them. Heck, most of my corporate clients will have to issue a 1099 to my CPA firm every year; most of them will hire my firm to prepare those forms. We currently estimate that if this law were enacted today we would have to prepare about 700 1099’s for our client’s (Normally we file about 200).
- These forms are due by January 30th and are already difficult to get filed on time. It will be a lot harder for accounting firms to get all of these additional 1099 forms prepared each year; hence the cost to prepare them will increase. This cost will be born by US businesses and ultimately by their consumers.
- The IRS will be absolutely swamped with additional 1099 forms. The IRS is already a couple of years behind; this law will serve to put them even further behind.
- The intent of this law is to make it so the IRS can “notice” that many businesses are under-reporting their income by matching the 1099’s to tax returns.
The second provision is a telling indicator of what will happen in the next few years. Currently employees are not taxed on the health insurance benefits provided to them by their employers. This law makes it so that as of January 2011 employers have to report the aggregate cost of health insurance benefits provided to each employee on each employee’s W-2. This change will have many effects:
- First off this is a sure indicator that the Democrats in the US Senate plan on taxing employer provided health insurance at the individual level. There is no other reason for requiring employers to provide this information to each employee.
- Secondly this is another accountant job creation act. It will require every employer in this country to break their health insurance costs out PER EMPLOYEE and report it on the employees W-2. W-2’s are supposed to be mailed by the end of January and report on the prior calendar year. So after the close of each year every employer on the country will have to have accountants break down the cost of health care per employee.
The third item is a direct attack on the entire insurance industry. This provision limits the deductability of executive pay in the entire insurance industry to $500,000 per year. This is socialist at best and communist at worst.
The fourth item that is absurd is that the law implements a 10% Federal excise tax on UV tanning. This replaces a previous provision that would have taxed unnecessary cosmetic surgery. There are a lot of items that are problematic with this stupid tax:
- First off how will it be collected? Will each business have to file forms with the Federal government every month to report their income from UV tanning and then remit the tax due?
- How on Earth will this new tax be enforced?
I could go on and on about how much money this law will make my accounting firm and how damaging it will be to American businesses (especially small businesses).
We have shed millions upon millions of jobs and the Senate Democrats seem determined to employ tens of thousands of accountants while at the same time increasing the cost of doing business in the US so that businesses will end up laying off employees.
Good Grief,
Mike Sylvester
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8 Responses to “US Senate is trying to make my firm a lot of money”
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Mike - A fifth item in the senate version of this that makes no sense in our political system is the limitation and “clawback” of income less expenses for health insurance companies - a net of 20% for individual policies and 15% for group plans. These percentages apply to all expenses including any possible profit that may result from being in the business of marketing health insurance!
And this on top of mandateing who must be covered in these plans - pre-existing conditions, all children until age 26 and no lifetime limits on payouts. All of these items will add to the cost of insurance - who do they think is going to pay for this? Health insurance profits in the recent past have not even kept up with inflation, per the averages being reported in financial reports of the insurance companies.
The taxpaying public will be covering all of the risk by backing up this program with the borrowing capacity of the Federal Government! With China buying most of the Federal Notes, we are going to be completely owned by them in my grandchildren’s earning years!
Can we do anything to stop this before November 2010(actually January 2011!)?
HOPE-N-CHANGE BABY!
Ya know, Mike, I’ve read a lot of your articles, and at times I find you are just being a curmudgeon and an ideologue. That being said, I respect you for being staunch in your beliefs and putting the information out there, regardless of whether or not I agree with your opinion on a subject.
This subject I can wholeheartedly agree with you about, though. This is just, as your second paragraph clearly states, “…stupid…stupid…stupid…” *facepalm*
I honestly believe that the majority of Congress and the Senate, regardless of party, need to be removed. Is there an impeachment process we can put into effect for the whole of Congress? lol
Mike,
I agree with nearly everything here. However, to me there should be no exemptions or deductions when it comes taxes. What a person wants to spend their money on is their business. With this said, when Healthcare was first used to entiece workers into staying or not leaving or comeing (what-ever) during the wage freeze years, it was a compromised to allow healthcare to be a tax exempt benefit. We no longer have wage freezes and let’s face it, why should those without insurance subsidize those who do? Income is income.
This has created a nightmare. First it was Medicare that dictated remibursement rate and not health incurance groups are negotiating lower prices which leads to others having to pick up the tab. The largest cost shifters today are company sponsored health insurance.
I think we could gain some cost control if employer based health insurance was treated as income (FICA, Federal and State). Let us face the fact that we are all driven to reduce taxes and now seek shelters such as IRA’s, 401k’s, health insurance, health savings accounts and the list is growing. Every time we add another catagory of non taxable income/benefits to the already list, we the people pay less in taxes.
This has come about because we the people cannot seem to vote out the idiots who spend to much. In retaliation we support non taxable benefits inorder to keep more of our money from their incompentent hands.
I will say this though, I predict that within three years after passage of this healthcare bill, that the next congress will repeal it. It happened with the catastrophic healthcare bill for Seniors over two decades ago. When the people learn how bad this reform is, they will vote in numbers not seen for a very long time.
We are so hosed.
Mike - I agree with you that this is just more paperwork that costs us all a lot of time and money. However, let’s not forget that there were already 60,000 or so pages of federal tax code and regulations in place when this Congress and Obama took office. Once you and the other million or so tax preparers in this country start lobbying for a value added tax, which most other developed countries utilize, I’ll know you are serious about tax reform.
ZMan,
I have supported replacing the income tax with a consumption tax for a LONG time.
Mike
Let’s see 40 million americans were without insurance. With this “plan” it is reported 16 million (depending who you talk too) will still be uninsured. Typical Washington politics. I can’t believe how many americans were suckered into thinking Obama would change anything. I just hope this time americans don’t get short term memory lose by november 2010 and 2012.
It has to be a bad bill when you have to bribe members of your own party to vote for something.