Expanded 1099 Rule Invites Identity Theft

An obscure tax rule in the health care bill is a huge invitation to identity theft.

In case you missed it, the massive health care bill includes a tiny provision that will require all businesses to issue 1099 information forms to every company with whom they do business in excess of $600 per year, starting in 2012.

The form 1099 is presently required when a business pays more than $600 in a year for services provided by an independent contractor. The form is not required for the purchase of goods or for purchases from corporations. The health care bill would require every company to issue a 1099 for the purchase of goods or services from any business including corporations.

Apart from the huge increase in record keeping and reporting for both buyers and sellers, there is an aspect of this that has not been mentioned previously.

The company or person who issues a Form 1099 has to secure the Social Security or Tax identification number of the vendor and their address in order to complete the form.

That means every business will need to write or call every supplier to ask for the supplier's tax ID number. This is going to put a huge time burden on a business unless they choose to disclose their tax ID number in every document that represents an invoice or receipt for a sale of goods or services. And every business that buys goods or service will have to be sure that they have the tax ID number of the vendor in case they need it.

And, the 1099 form also requires the issuer of the form to include their name and tax I.D. number and address. So every business will have the tax ID number of every customer that buys more than $600 of goods or services. And every business will have the tax ID number of every supplier from whom they bought more than $600 in goods or services.

Rep. Dan Lungren (R-CA) has submitted a bill that would repeal this rule. Let's hope he gets a lot of support.

Vern