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Operator protests 1099 rule on Capitol Hill

As Congress considers repeal of an especially unpopular paperwork provision in last year’s health-care reform law, a Colorado restaurateur testified this week that the requirements would overwhelm his small business.

Mark Eagleton, owner of an Egg & I franchise unit in Arvada, Colo., told the House Committee on Small Business Wednesday that “providing 1099s for essentially all business-to-business transactions may be a simple edict, but it could put me out of business.”

Eagleton, testifying on behalf of the National Restaurant Association and the Colorado Restaurant Association, added: “The practical consequences of the expanded 1099 requirements are staggering for a business like mine.”

Congress is considering the repeal of Section 9006 of the Patient Protection and Affordable Care Act of 2010, which will require businesses, starting in 2012, to report all transactions with vendors, contractors and partners that in the aggregate are valued at $600 or more in a year. The measure covers payments made in cash or by check for services and materials.

Other business organizations, including the International Franchise Association, are seeking repeal of the 1099 provisions. Steve Caldeira, IFA president and chief executive, said earlier this month, “The current law imposes excessive cost burdens onto the backs of small businesses which prevent them from growing and creating new jobs.”

Eagleton told the House panel on Wednesday that he works with 200 to 300 vendors each year and will have to start tracking purchases for each one.

“Not all will reach the $600 threshold,” he explained, “but since I don’t know who will, I will need to record all the purchases I make. I must buy, install and learn new software; track down each vendor’s taxpayer identification number and address; key in information to 200 to 300 vendors; compile data onto 1099s; and print and mail forms to vendors and the [Internal Revenue Service] if my purchases to any one vendor total more than $600 for the calendar year.”

Further, Eagleton said the mandate will require him, for example, to provide 1099s to his local grocery for a $1.79 head of Romaine lettuce he buys each day to add to his salad mix and even to his local nursery for the outdoor seasonal plants he buys once a year.

Eagleton said local business people frequently use his restaurant for breakfast or lunch meetings, and pay in cash or check for their weekly or monthly meetings. The new 1099 mandate could require them to issue 1099s to the Egg & I if they spend more than $600 in his restaurant during a year, he noted.

“Many of these small businesses do not have a large administrative staff to handle recordkeeping and reporting responsibilities,” Eagleton said.

The burden on his business will be substantial, he added. “I have two choices: Do it myself, or pay someone else to do it,” he told the committee. “Where am I going to come up with the money? I don’t have spare assets to put into play to make this happen.”

Contact Ron Ruggless at [email protected].

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