Warren Wealth Article Archive

Section 9006 of the health care reform bill is going to give businesses headaches.

Provided by Jacob Warren

Picture this … it’s a chilly morning in January 2012. You head out to your local office supply store to stock up on some essentials for your business – printer cartridges, copy paper, post-it notes, and a 500-pack of 1099 forms.

What? What was that last item again? 1099s? Yes, we may need them in bulk.

In 2012, you may need hundreds of 1099s. Why? Section 9006 of H.R. 3590 (the Patient Protection and Affordable Care Act, better known as the health care reform bill) has quietly ordered an enormous change in tax reporting.

Section 9006 says that starting on January 1, 2012, all businesses must issue 1099 tax forms not only to freelancers and vendors, but also to any individual, business or corporation from which they purchase more than $600 in goods or services in a tax year.1,2

Think about this for a moment. Let’s say that in 2012, you spend a few days in Dallas on business and stay at a nice hotel. If the bill is more than $600, you’ll have to give that hotel (and the IRS) a 1099 for your visit. Suppose you buy $900 worth of office furniture at a big-box retailer. Guess what: your company will have to give that retailer (and the IRS) a 1099.1

If you rent office space, you’ll need to send a 1099 to the IRS and your landlord. If your business buys a used truck worth more than $600, it will be time for a 1099. And so on.3

Even if you pay more than $600 incrementally to a business for goods or services in 2012 (i.e., you buy wine and sparkling water for your café every week from the same warehouse), you will still have to issue that business and the IRS a 1099.1,2

This means you’ll have to have taxpayer ID numbers for every freelancer, vendor and business from whom you purchase tangible goods and services.

Why would the government do this? The goal is better reporting, plain and simple. The IRS estimates that $300 billion (that’s billion) in tax revenue goes down the drain annually as a consequence of unreported income.1

If 1099s record the majority of payments a business makes, that means businesses and self-employed individuals will be less likely to understate revenue and overstate expenses. If you are looking for a silver lining in all this, here it is: in 2012, it will be easier to figure out precisely which business transactions need 1099s. If more than $600 is involved, the answer will be yes – that will be the only test.1

Is anyone working to repeal this change? Yes. Rep. Dan Lungren (R-CA) has introduced the Small Business Paperwork Mandate Elimination Act to try and get rid of this demand. At some point in 2011, the IRS will have public hearings on the new law and release regulations pertaining to it. Expect a loud, lively protest.4


Jacob Warren
Warren Wealth Management
111 West Port Plaza Drive, Ste 300, Saint Louis, MO 63146
(866) 463- 0752 ext. 52337 toll free, (314) 819-0464









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Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc., Member FINRA, SIPC, and Registered Investment Advisor. Warren Wealth Management and Woodbury Financial Services, Inc. are unaffiliated entities.



Content provided by Peter Montoya, Inc. These are the views of Peter Montoya, Inc., not the named representative or Woodbury Financial Services, Inc., and should not be considered investment advice. Neither the representative or Woodbury Financial offer tax or legal advice. All information is believed to be from reliable sources; however, the publisher makes no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting, or other professional services. If expert assistance is needed, the reader is advised to work with a competent professional. Consult your representative for further information.
.com, www.montoyaregistry.com, www.marketinglibrary.net
Citations
1 – money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/ [5/5/10]
2 - boston.com/business/personalfinance/managingyourmoney/archives/2010/04/healthcare_refo.html [4/12/10]
3 - cato-at-liberty.org/2010/04/26/costly-irs-mandate-slipped-into-health-bill/ [4/26/10]
4 - lungren.house.gov/index.php?option=com_content&task=view&id=620&Itemid=86 [5/14/10]



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Main Street’s anger over Wall Street reaches the Senate floor.

Provided by Jacob Warren

Another reform bill is now making its way through the Senate – a bill that would reregulate the financial services industry with a few goals in mind:

1) Preventing failures of large banks and financial services firms, or at least insulating taxpayers and the economy in such an emergency
2) Creating a new financial watchdog agency to protect consumers
3) Tightening regulations on derivatives
4) Banning banks from proprietary trading (with the “Volcker Rule”)
5) Increasing transparency1,2,3

Anger on Main Street, while palpable, won’t pass these reforms. In the Senate, Democrats are largely driving them; Republicans want to see them altered. Let’s look at them briefly.

The bailout issue. The bill introduced by Senate Banking Committee Chairman Chris Dodd (D-CT) would set up an “orderly liquidation fund” - $50 billion deep – to help the federal government wind down any big banks that threaten to go belly up.3 Senate Republicans argue that this would amount to a permanent “bailout fund” that would implicitly encourage federal bank rescues. Some Republicans think it perpetuates the “too big to fail” mentality.

A group of Congressional Democrats have introduced the S.A.F.E. Banking Act, which would cap bank size: no U.S. bank or bank holding company could hold more than 10% of the country’s insured deposits. The S.A.F.E. Act would also hold the amount of non-deposit liabilities at financial institutions at 2% of GDP for banks, and set a 6% leverage limit for bank holding companies.4

The proposed new Bureau. The reform bill proposes creating a Bureau of Consumer Financial Protection, possibly as an offshoot of the Federal Reserve. It would watch over banks and credit unions with $10 billion or more in assets, as well as major investment firms and mortgage lenders apart from the banking industry. In addition to trying to protect people from predatory or discriminatory practices, the BCFP would also seek to better inform consumers via an Office of Financial Literacy.2 Skeptics see this as another multibillion-dollar layer of bureaucracy, a “fifth wheel” whose mission could just as well be handled by an augmented Fed.

Crackdowns on derivatives & proprietary trading. Ah yes, derivatives – those investments no one really understood. Or watched closely. The reform bill would require banks to build a wall between their derivatives trading and their commercial banking operations – in other words, the “Volcker Rule” would be the law. Well, banks do make a lot of money through proprietary trading in their own accounts. In late April, JP Morgan analysts concluded that if the Volcker Rule went into effect, the six biggest global investment banks would need $85 billion more to capitalize the new investment banking divisions they would need to create. According to the JPMorgan scenario, Deutsche Bank would have to grab $26 billion alone and BNP Paribas would have to come up with $21.1 billion.5

A better understanding for all? If the reforms become law, regulators would work to make the “fine print” that comes with a credit card, a mutual fund or a mortgage product clearer, so that fees and other quietly assessed charges would become easier to understand. Hedge funds would have to register with the federal government. Certain Democrat-driven amendments would even demand more transparency at the Federal Reserve. As Sen. Bernard Sanders [I-VT] remarked in late April, “During the bailout, the Fed lent trillions of dollars at zero or near-zero interest rates to large financial institutions. During the Budget Committee hearing, I asked Chairman Bernanke who received that money, [and] he refused to tell us."

A new chapter, or a whole new book? You could argue – convincingly - that a loosely regulated Wall Street caused or least exacerbated the “Great Recession”. In the aftermath of that downturn, we may see the biggest rewrite of financial rules and regulations since the Great Depression coming before 2010 ends.

Jacob Warren
Warren Wealth Management
111 West Port Plaza Drive, Ste 300, Saint Louis, MO 63146
(866) 463- 0752 ext. 52337 toll free, (314) 819-0464









---------------------------------------------------------------------------------
Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc., Member FINRA, SIPC, and Registered Investment Advisor. Warren Wealth Management and Woodbury Financial Services, Inc. are unaffiliated entities.


Content provided by Peter Montoya, Inc. These are the views of Peter Montoya, Inc., not the named representative or Woodbury Financial Services, Inc., and should not be considered investment advice. Neither the representative or Woodbury Financial offer tax or legal advice. All information is believed to be from reliable sources; however, the publisher makes no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting, or other professional services. If expert assistance is needed, the reader is advised to work with a competent professional. Consult your representative for further information.
ntoya.com, www.montoyaregistry.com, www.marketinglibrary.net


Citations
1 – msnbc.msn.com/id/36770907/ns/business-us_business/ [4/27/10]
2 – csmonitor.com/USA/Politics/2010/0429/Financial-reform-bill-101-what-it-means-for-consumers [4/29/10]
3 – csmonitor.com/USA/Politics/2010/0428/Financial-reform-four-sticking-points [4/28/10]
4 – memphisdailynews.com/editorial/Article.aspx?id=49660 [4/29/10]
5- reuters.com/article/idUSN2924718120100429 [4/29/10]
6 - csmonitor.com/USA/Politics/2010/0428/Republicans-relent-clear-financial-reform-bill-for-debate/%28page%29/2 [4/28/10]



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