Reducing paperwork and the deficit (Sen. Ben Nelson)

Well, one early challenge is now before us. It involves protecting small businesses from the burden of additional paperwork, while helping reduce the deficit and making sure everyone pays their fair share of taxes.

I recently wrote a letter, signed by eleven other senators, to IRS Commissioner Douglas Shulman urging him to find ways in which small businesses can reduce expected paperwork from a new requirement in the healthcare law concerning filings of Form 1099.

Level the playing field

The law requires businesses to issue information reports to incorporated and unincorporated providers of property and services who are paid $600 or more during the year. Current law mandated that businesses already file reports for unincorporated providers of services.

The requirement is intended to close the “tax gap,” the difference between the taxes legally owed to the government and what is actually paid. In this case, some businesses are paying their taxes, while others are not.

In 2005, the Government Accountability Office explained why this is important. In testimony before Congress, the GAO said, “their failure to pay taxes increases the burden of funding the nation’s commitments on those taxpayers who voluntarily pay their taxes.”

The new provision is expected to bring in $17 billion in revenues from taxes that are currently owed but not being paid from 2012 through 2020. Furthermore, it levels the playing field for all businesses. It is fundamentally unfair that some Americans pay taxes they legally owe while others do not.

As it helps pay for health insurance reforms and reduces the deficit, this provision won’t raise taxes on anyone. That is important during these times of record deficits and economic uncertainty.

Cut back on paperwork

However, the new requirements may place a hardship on small businesses by creating an extra paperwork burden, which is what I want to nip in the bud. Already, the IRS has identified one exception that could help. All transactions involving credit cards or debit cards are exempt, which could help small businesses and individuals.

In my letter, I called on the IRS to find additional ways to minimize the paperwork burden on small businesses and report to Congress as to how it will do that before implementing this provision.

Fix it, don’t repeal it

A repeal of this section of the law, which some have called for, would keep the unfair system in place and would add $17 billion to the deficit. Some also have said it will add 16,000 new IRS agents, a claim the non-partisan FactCheck.org called “wildly inaccurate” and stemming from an “analysis based on guesswork and false assumptions, and compounded by outright misrepresentation.”

I plan to continue to put the pressure on the IRS to find ways to reduce the paperwork so as not to burden our small businesses. The health reform law has new tax credits that could help thousands of Nebraska small businesses provide health coverage. We don’t need to add a paperwork headache when they are trying to do the right thing by their employees.