Update on the (hopefully no longer) upcoming 1099 change.

I haven't had time to photograph or post last week's candle batches yet, due to a very busy last two weeks of summer, but did want to take 5 minutes to post a little update on the 1099 reporting change I wrote a blog post about in May. I read an excellent summary of the current status in this article today. It seems that nearly all business owners are in agreement that the increased reporting requirement places a ridiculous burden on small business owners. How do you get the tax information of businesses where your employees spend money while on the road? How do you figure out who to contact from a national chain store? How can you add the added cost of all that tax reporting time into your product without loosing all your customers? But, probably the most pertinent question is... how is the IRS going to handle the millions of additional papers they will have to process each year and make money to pay for the health care bill? Thankfully, the IRS's own National Taxpayer Advocate is in agreement with business owners' objections and included her opinion in her midyear report to Congress. Thanks to this report and the many questions and complaints received by government representatives, two amendment options are now being considered.

Option #1 (Republican): an amendment to repeal the 1099 change and eliminate it all together.

Option #2 (Democrat): this measure would scale back the upcoming changes. Businesses with 25 or fewer employees would be exempt from complying with the new requirements. Businesses with more than 25 employees would only have to send a 1099 to retailers who sell them $5,000 or more in goods (instead of $600) and they would be allowed to exclude credit card charges because the credit card companies would report the information directly.

I don't know about you, but I would be happy with either of these options. As a sole proprietor, I'd be exempt either way! The issue (as usual) is how the government will make up this lost revenue. The Democrats want to eliminate an income deduction for the five largest oil companies. To me, this sounds like a suggestion the Republicans will never accept and, furthermore, one which will directly effect the pocketbook of every American. I'd hate to see health care finally become affordable at the same time that fuel costs double. The Republican amendment claims it will be paid for with money from health care programs created by the reform law. Uhm... wait... I thought the 1099 change was supposed to pay for the health care. Now it can pay for itself? Hmmm...

The House and Senate are in recess right now, but will continue trying to tackle this issue after Labor Day. I'm glad it seems they are making progress, but hope they are able to come up with a solution that could be accepted by everyone.

The Health Care Bill vs The Sole Proprietor

Though I am not sure how successful the changes proposed in the new health care bill will work out for the millions of uninsured, I am fairly certain one of the hidden tax changes is going to hurt many sole proprietors. This article was highlighted on the yahoo home page on Friday and reading about the amount of paperwork the IRS will be expecting me to do beginning in 2012 upset me. I work as an office manager full time and am very familiar with how long it takes to gather the information and send out 1099 forms to our subcontractors each year. The IRS now wants all businesses to send out 1099 forms to all businesses (corporations included) which provide them with $600 or more of goods or services each year.

It's the part about goods that bothers me. As of right now, you only send out a 1099 form to an individual (sole proprietor) who has provided you with $600 or more in services. It makes sense. You are hiring that person to do a service which they will get paid for and which cannot be tracked easily by any other method. Generally people such as myself, who make & sell items to stores, online and at craft fairs are more visible and easy to track down without all this paperwork. Perhaps the teams that are already traveling the state checking for proper business permits could do a bit of multi taskings and pass names to the IRS of companies that they think should be audited. Then again, maybe it's too late to get the hidden tax torture erased from the bill.

Considering I have experience preparing these forms and Homemade by Hoyt would have less than 10 vendors who would qualify for a 1099, I think I can survive the change. However, I think there are many sole proprietors (artists, handymen, contractors, etc.) who work their business full time but aren't very good at paperwork. They manage to produce the required sales receipts, invoices or contracts required for the day to day business, but rely on an accountant to do the more complicated things like taxes. It could cost anywhere from a few hundred to a few thousand dollars for someone to gather the information for you and prepare the forms. Maybe it's because I'm the type of person who believes that people will always find a way to cheat, no matter how hard you try to stop them, but I think this 1099 thing is a bad idea. Are they ready to handle the piles of paperwork they are asking us to send? Do they really think they will make enough additional tax money to pay for the extra jobs? I really hope they've thought this through...

Fighting Freight Fumes

On January 1, 2010 I pledged to donate 5% of every purchase to support the Environmental Defense Fund... I think many people wondered why? Well, here's the scoop. I am a bit of a flower child at heart and see myself as someone who really cares about the environment. Yet, I've had more than one semi-heated discussion over the so called evils of paraffin wax which left me wishing I could make certain people understand that those candles are my art, and they would never be the same if I changed the wax. Different wax means an all new texture and color scheme. And, the fact is that my pillar candles are the least of our worries when it comes to slowing and/or stopping global warming.

This week I read some information on the EDF website that made me think (in a new way) about the ways that my habits as a modern candle maker help or hurt the environment. It was a study just published called The Good Haul: Freight Innovations for the 21st Century. It highlights various ways to modernize shipping which are already at work around the world, proving that we can make a huge impact on carbon emissions. I can't say that I read the entire 68 page report, but there were several case studies I found really exciting!!! Did you know that a truck produces 22 lbs of carbon dioxide for every hour that it idles? Now think about the fact that every trucker must rest on the road and often requires air conditioning or heating in order for the cab to be comfortable enough to sleep... and the only way to turn those things on is with power. Thankfully, some states are adding "electrification facilities" at truck stops in order make a dent in the 11 million tons of carbon dioxide produced annually as a result of long-term idling. I personally can't believe this hasn't been done sooner. Idling big rigs are not only unhealthy for the environment, they are more directly harmful to the driver... that air they breathe while resting can't be good for their lungs! I get upset when I see regular sized vehicles idling longer than 5 minutes.

There were many other innovative programs described in the report... cranes replacing forklifts, off-hours driving incentives, and meticulously structured emissions taxation systems... so many great ideas that need to be used on a larger scale.

However, I do not feel that independent entrepreneurs should exempt themselves from personal participation in this cause. I am pretty sure there are a large percentage of us that get our materials shipped to us and who ship products to our customers. Here are three ways I feel that I have directly contributed to the cause:

1. I buy materials from vendors who are located nearby whenever possible to reduce shipping distance. My #1 material supplier, General Wax and Candle Co., is actually only an hour and a half drive away. I stop by whenever I'm driving to or through L.A. to pick up supplies myself, cancelling the need for shipping all together.
2. I purchase my materials in bulk. No matter how close or far away the items come from, it seems to me that the less often I purchase them, the less often a large truck would need to haul the package to my house. My goal is for each order to last a minimum of two months, but for vendors which only sell one or two products I desire, I try to order at least a year's supply.
3. I price my candles in a way that encourages long lasting candle orders. If you haven't already noticed, my smallest candles aren't that much cheaper than the medium sized ones... and my large candles are very fairly priced. The USPS backs up my system by charging progressively less per ounce as the package gets heavier... and candles are not feathers, which means shipping can cost a bit. But, if you spread that cost over four candles, it's a much smaller extra charge than if you only buy one.

I would love to hear any and all tips you may have about how I can be more green in regards to shipping products and/or ordering materials. In the mean time, I hope you will support and promote the Environmental Defense Fund's fight to modernize shipping.