1099 Avalanche Averted

In a segment I like to call, “How did I miss THAT story?”…

In a statement released by the White House on April 14th, President Obama is quoted as saying

“Today, I was pleased to take another step to relieve unnecessary burdens on small businesses by signing H.R. 4 into law. Small business owners are the engine of our economy 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.”

The good news is you can save those #2 pencils for calculating how much you are saving not only in extra taxation but in labor by not having to fill out 1099 forms all year long.

Mr. President, if you were that concerned about the burden of extra paperwork on small businesses, how did this little gem of an idea make into law in the first place?

What’s that? The President can’t talk now? Oh, I see, he’s late for the gym; he has a spin class.


  1. says

    And while we would by no means dismiss the issue as a misunderstanding it is apparent that the official saving statistics mean little in the abstract. Those primarily concerned with the growth of the economy view low saving as unadulterated bad news arguing that it is bound to lead to inadequate accumulation of capital.

  2. says

    The truth IS stranger than fiction when you actually sit down and wade through the LAW itself about WHEN a 1099 is required. Well, the astonishing part of the LAW is that most of the time, they are NOT filed on Americans -regardless of how much pay the person received!

    A Form 1099-MISC is used to report payments made in the course of a trade or business to another person or business who is not an employee.
    [SOURCE: IRS Website, http://www.irs.gov/faqs/faq12.html

    The term "trade or business" is legally defined as follows:

    26 U.S.C. Sec. 7701

    "The term 'trade or business' includes the performance of the functions of a public office."

    "public office" as used above is then legally defined as follows:

    Public office

    “Essential characteristics of a ‘public office’ are:

    (1) Authority conferred by law,

    (2) Fixed tenure of office, and

    (3) Power to exercise some of the sovereign functions of government.

    (4) Key element of such test is that “officer is carrying out a sovereign function’.

    (5) Essential elements to establish public position as ‘public office’ are:

    (a) Position must be created by Constitution, legislature, or through authority conferred by legislature.

    (b) Portion of sovereign power of government must be delegated to position,

    (c) Duties and powers must be defined, directly or implied, by legislature or through legislative authority.

    (d) Duties must be performed independently without control of superior power other than law, and

    (e) Position must have some permanency.”

    [Black’s Law Dictionary, Sixth Edition, p. 1230]

    Nowhere in the entire I.R.C. is the above definition of “trade or business” expanded to include any activity other than a “public office”, which is defined above, and therefore it is all-inclusive and limited to “public offices”. This is also confirmed by the rules of statutory construction, which say on this subject:

    “Expressio unius est exclusio alterius. A maxim of statutory interpretation meaning that the expression of one thing is the exclusion of another. Burgin v. Forbes, 293 Ky. 456, 169 S.W.2d 321, 325; Newblock v. Bowles, 170 Okl. 487, 40 P.2d 1097, 1100. Mention of one thing implies exclusion of another. When certain persons or things are specified in a law, contract, or will, an intention to exclude all others from its operation may be inferred. Under this maxim, if statute specifies one exception to a general rule or assumes to specify the effects of a certain provision, other exceptions or effects are excluded.”

    [Black’s Law Dictionary, Sixth Edition, page 581]

    “When a statute includes an explicit definition, we must follow that definition, even if it varies from that term’s ordinary meaning. Meese v. Keene, 481 U.S. 465, 484-485 (1987) (“It is axiomatic that the statutory definition of the term excludes unstated meanings of that term”); Colautti v. Franklin, 439 U.S. at 392-393, n. 10 (“As a rule, `a definition which declares what a term “means” . . . excludes any meaning that is not stated’”); Western Union Telegraph Co. v. Lenroot, 323 U.S. 490, 502 (1945); Fox v. Standard Oil Co. of N.J., 294 U.S. 87, 95-96 (1935) (Cardozo, J.); see also 2A N. Singer, Sutherland on Statutes and Statutory Construction § 47.07, p. 152, and n. 10 (5th ed. 1992) (collecting cases). That is to say, the statute, read “as a whole,” post at 998 [530 U.S. 943] (THOMAS, J., dissenting), leads the reader to a definition. That definition does not include the Attorney General’s restriction — “the child up to the head.” Its words, “substantial portion,” indicate the contrary.”
    [Stenberg v. Carhart, 530 U.S. 914 (2000)]

    The requirement for Information Returns, including the IRS form 1099, originates from Internal Revenue Code section 6041, which says under paragraph (a) that all payments of over $600 that are made in connection with a “trade or business” must have Information Returns filed on them. To wit:

    TITLE 26 > Subtitle F > CHAPTER 61 > Subchapter A > PART III > Subpart B > § 6041

    § 6041. Information at source

    (a) Payments of $600 or more

    All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042 (a)(1), 6044 (a)(1), 6047 (e), 6049 (a), or 6050N (a) applies, and other than payments with respect to which a statement is required under the authority of section 6042 (a)(2), 6044 (a)(2), or 6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.

    It is quite common for financial institutions and private companies to misapply the state and federal revenue “codes”, and especially the provision above.