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Association urges Form 1099 modifications

Washington—The Association urged the Internal Revenue Service "to mitigate the effect" of Form 1099 tax reporting requirements set to begin in 2012. The ADA and an organized dentistry coalition are simultaneously seeking legislative redress.

Association officials in a letter to the IRS expanded to the regulatory front the profession's legislative efforts to block the requirements or reduce their impact on small business dental practices. "The ADA is concerned that these new reporting requirements will unnecessarily increase the cost of providing dental care to our patients and will ultimately increase the cost to the patient," said the letter signed by Dr. Ronald L. Tankersley, ADA president, and Dr. Kathleen T. O’Loughlin, executive director.

Inserted as a revenue measure in the health care reform law, Section 9006 of Public Law 111-152 amends the tax code to require that businesses report to the IRS payments made by any vendor after Dec. 31, 2011, that exceed $600 a year. The tax law change expands existing reporting requirements to include goods and services and corporations that are not tax-exempt. With some exceptions, payments to corporations are currently exempt from the tax reporting requirement.

Most private sector dental practices are small businesses, the Association told the IRS, which invited comment on proposed regulations to implement the new law.

"It is not possible to determine precisely the number of additional Form 1099s that will need to be generated as a result of the amended section 6041, but for each of these private practitioners, it will likely be a considerable burden," the ADA said.
"At a minimum, additional record keeping will be required along with changes to existing practice management software or bookkeeping systems. In addition, accounting and tax preparation fees will undoubtedly increase. Ultimately, these costs will be borne either by the dentist or the patient without any increase in benefit to the patient.

"Because of these concerns, the ADA requests that the IRS do all in its power to mitigate the effect of these reporting requirements."

The IRS is considering exempting transactions that use credit or debit cards. "The ADA suggests that the IRS examine whether the same exemption should be extended to include transactions paid using electronic fund transfers or written checks from a business checking account which, we believe, is essentially the same as using a debit card. In fact, the only transactions that should require a Form 1099 may be cash transactions."

The Association also recommended that the IRS issue a regulation to exempt payments to corporations and urged that the Treasury and IRS commissioner "make appropriate recommendations to Congress" to adjust for inflation the $600 reporting threshold established in the early 1950s.

The U.S. Senate having rejected legislation to repeal the new tax reporting requirements or exempt small businesses with 25 or fewer employees, businesses including dental practices will have to report a wider range of payments starting in 2012. The IRS says it wants to implement the law "in a manner that minimizes burden and avoids duplicate reporting."

The Association will urge the House of Representatives and Senate to revisit the Form 1099 reporting requirements before they take effect. The Association joined an organized dentistry coalition in urging repeal of the requirement Organized Dentistry Coalition.