WASHINGTON, D.C. — U.S. Representative David Schweikert (AZ-01) yesterday authored an op-ed for the Phoenix Business Journal promoting the Small Business Paperwork Savings Act, legislation he introduced last month to increase the Form 1099 reporting requirement threshold to account for cost-of-living adjustments since 1954, when the $600 threshold was first established in the Internal Revenue Code. Rep. Schweikert’s legislation was included in the House Ways and Means Committee’s signature economic package which passed out of Committee in mid-June and awaits a full vote by the House.
My View: Let’s help US entrepreneurs by increasing form 1099’s reporting threshold
Congressman David Schweikert
Phoenix Business Journal
July 13, 2023
Around Phoenix, it’s quite common for small business owners and self-employed individuals working from home to pay for services like having their lawn mowed or their palm trees trimmed. Contractors are hired to clean, paint walls, and help with IT systems.
These transactions should be relatively straightforward given their routine occurrence. But current law creates quite the headache for the average entrepreneur needing these services covered.
Under Section 6041 of the Internal Revenue Code, employers are required to file a Form 1099 if they paid a nonemployee at least $600 during the year for business purposes. This provision was originally established in 1954 and has yet to be updated.
That’s right – this IRS reporting rule is nearly 70 years old and has never been adjusted for inflation. To put that in perspective, $600 in 1954 would be worth 10 times that amount today, according to the Bureau of Labor Statistics.
Think about how many times we pay independent contractors for various services – plumbing, landscaping, photography, cleaning or repairs. It wouldn’t take much to eclipse that $600 threshold and bury hardworking Americans under a mountain of burdensome paperwork.
That’s why I introduced the Small Business Paperwork Savings Act to increase the reporting threshold to $5,000 to account for cost-of-living adjustments in the last 70 years and adjust the amount for inflation going forward. This legislation lifts an incredible burden from American entrepreneurs, allowing them to better serve their customers, focus on their craft, and invest in job creation.
This bill also functionally decriminalizes our society because of the current law’s strict requirements directing payors to withhold 24% of the total payment to independent contractors if they’re unable to present their taxpayer identification number (TIN) to the payor. It would be my guess that few people have a tax ledger on the side of their refrigerator to calculate just how much money to set aside in a trust account if their office cleaning crew doesn’t know what their TIN is.
After listening to several entrepreneurs in field hearings across America earlier this year talk about the inconveniences caused by filing onerous paperwork, the House Ways and Means Committee made my legislation a priority in its signature economic package to help struggling families, grow jobs, and support a stronger economy.
We also took action to eliminate red tape for homeowners who hire cleaning or repair help through an app and young parents who use Venmo to pay a babysitter to watch over their children during an evening out. Under legislation signed by President Biden two years ago, those transactions are now subject to the same $600 reporting threshold — and we repealed that change. This legislative package passed out of committee in mid-June and awaits a full vote by the House.
Raising the 1099 reporting threshold will better balance the reporting that makes it easier for the IRS to track individuals who are purposely avoiding taxes while not bringing down the hammer on small businesses that hire landscapers, repairmen, and other contractors.
This commonsense legislation reduces unnecessary costs for millions of Americans suffering from historic inflation, removes bureaucratic red tape by eliminating the paperwork burden, and restores Section 6041 to its original intent of keeping track of individuals’ more significant business transactions.