It appears the federal government believes it has found the end of a rainbow — the site of a pot of gold that may help pad its coffers, at least a little.
Come Jan. 1, 2012, the Internal Revenue Service will require all small businesses and self-employed people to report on Form 1099 the purchase of all goods and services that exceed $600 in a calendar year.
The idea is that the new requirement might capture some tax revenue that has been missed in the past. Federal estimates suggest the requirement will generate about $17 billion over 10 years.
But the price of the change seems too costly to some business folks, for small businesses lacking the resources to execute the requirement and for consumers whose private information could be compromised.
The 1099 form would require a person's name, address and Social Security number. Some business owners might decide to sell that information, which can be worth a tidy sum to marketing companies.
But that appears to be an unintended consequence of the law change.
The real focus is on capturing business income in business-to-business transactions, said Benson Goldstein, a senior tech manager at the American Institute of Certified Public Accountants.
"The purpose of the law is not to get consumers," Goldstein said. "The problem is … who's a consumer and who's a business?"
Take the sellers and dealers of collectible coins (it could be coins, cars, dolls, baseball cards, etc). A person with a large collection of coins might decide to begin selling them.
Is the person just a consumer selling stuff around the house? Or is the person really running a self-employed business, and how does a dealer buying the coins know how to classify the person?
Some have viewed this as a new requirement to "register your gold," though that's not what the government's asking. Still, all the paperwork kind of feels like registering your gold or signing away your firstborn.
"This stuff is very complicated," Goldstein said.
The dealers of gold and gold bullion say the new requirement would overwhelm the small businesses and self-employed members of their industry, who could be required to track and issue hundreds, even thousands, of 1099s every year for all items over $600.
"I figure it's going to take two additional employees to do all the paperwork," said Pat Heller, treasurer of the Industry Council for Tangible Assets, a trade association that represents about 5,000 coin and bullion dealers.
Heller, owner of Liberty Claims Service in Lansing, Mich., said he has about 1,000 customers a week, with 25 percent selling him coins and other products for more than $600. He said the new requirement could force him to produce about 10,000 1099s a year.
Some small dealers already see it as too onerous to stay in business.
"I have had some people say to me … 'I'm in my 60s, I can retire. If this is going to go through, I'm done,' " said Diane Piret, industry affairs director for the Industry Council for Tangible Assets.
The new law was enacted in March (it was tacked on to the health care bill, ostensibly to help pay for it), though it won't take effect until Jan. 1, 2012.
The IRS has issued a request for public input about implementation of the new law, in an effort to minimize the burden in producing the information. The deadline for responding is Sept. 29.
So here's the Edge:
• Voice your concerns. You can find information about the IRS public comments notice at www.irs.gov/newsroom/article/0,,id=225029,00.html.
• Contact your accountant. Before the law takes effect, it would be wise to contact an accountant to understand what the best timing might be to sell your tangible assets.
Ivan Penn can be reached at email@example.com or (727) 829-2332. Follow him on Twitter at www.twitter.com/Consumer_Edge and find the Consumer's Edge on Facebook.