Updated Friday, April 15

President Obama signed into law a repeal of the 1099 reporting requirements that were included in last year’s healthcare reform act, as well as a similar 1099 requirement that was included in the Small Business Act. It should save business owners a significant amount of paperwork – and, by extension, a significant amount of time and money.

“Small business owners are the engine of our economy,” President Obama said in a statement, “and because Democrats and Republicans worked together, we can ensure they spend their time and resources creating jobs and growing their business, not filling out more paperwork. I look forward to continuing to work with Congress to improve the tax credit policy in this legislation and I am eager to work with anyone with ideas about how we can make health care better or more affordable.”

Congress has debated the 1099 issue for about a year, since it was included in the massive healthcare reform legislation that passed in March 2010. A provision in the Patient Protection and Affordable Care Act would have forced a business to file a Form 1099-MISC for any vendor with whom it did $600 worth of business in a year, including corporations. A similar provision in the Small Business Act required more 1099s from owners of rental property.

Those provisions were designed to make it more difficult for businesses to hide income from the IRS, and the Congressional Budget Office estimated at the time that the expanded reporting requirements would generate billions of dollars in additional tax revenue over the next 10 years.

But the 1099 provisions were terribly unpopular, and both houses of Congress soon began looking for ways to reduce the filing requirements. The House and Senate recently passed separate bills that would repeal the 1099 requirements, but the bills differed widely in how they would offset the loss of tax revenue. The bill that originally passed the Senate called for $44 billion in cuts to other programs but did not specify where or how those cuts would come. The House then passed a bill that would cut certain health insurance subsidies, and on Tuesday the Senate passed the same bill.

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