Updated: Aug 13, 2020
Penalties for Information Returns. Changes are required in current law to prevent the severe and draconian penalties for failure to timely file Form 1099 MISC information returns. Information returns are required for payments of $600 or more, 26 USC §6041(a) To correct current law, the penalty for failure to file Form 1099-Misc should not apply to companies with under $1,000,000 in gross income. Information returns are not tax returns. Information returns are appropriate for large companies with thousands of employees, or for large banks with thousands of mortgages. Information returns for a small sole proprietorship are clearly futile, because benefits to the Service are minimal while the costs and time required for a sole proprietor are large.
Although Form 1099 reporting requirements were initially presented as necessary for accuracy, the Service failed to disclose that the actual purpose was to raise revenue without appearing to raise the tax rate. Failure to disclose when there is an obligation to disclose is fraud, 18 USC §1001, United States v. Irwin, 654 F.2d 671, 678-79 (10th Cir. 1981), cert. denied, 455 U.S. 1016 (1982). Prior changes in the law were intended to cure evident defects: On April 5, 2011, Congress repealed two recent laws. One of the laws, enacted with the 2010 Health Care Bill, increased 1099 reporting to include property purchases as well as service purchases. It also required reporting payments to corporations as well as individuals. The new bill is a complete repeal of the provision in the Health Care bill. ....Congress also repealed a second 1099 reporting requirement. The repealed 1099 filing would have required landlords that paid $600 or more to any service provider to file a 1099-MISC. Congress originally enacted the provisions that are now repealed to generate revenue to help pay the cost of the Health Care Bill. It was anticipated the provisions would produce $25 billion of revenue for the government over 10 years. Hoff, G. "Congress Repeals Recent Legislation That Would Have Placed a Tremendous Burden on Farmers and Land Owners." farmdoc daily (1):34, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 6, 2011. Permalink: http://farmdocdaily.illinois.edu/2011/04/congress-repeals-recent-legisl.html Also see: Form 1099 Information Reporting Requirements as Modified by the Patient Protection and Affordable Care Act, Congressional Research Service, August 6, 2010.
Penalties to file Form 1099 are substantial, up to $280 per information return, 26 USC §6722. For a tax return, there is a the 3-year statute of limitations on assessments, 26 USC §6501(a), and the 6-year limit for omission of over 25% of gross income. 26 USC §6501(e). For an information return, the Service now asserts there is no statute of limitations for failure to timely file an information form. Thus, a small business firm is required to file a Form 1099 for all prior years in which more than $600 was paid for nonemployee compensation. Although Form 1099 Copy B may be downloaded from the internet, the scannable red ink forms Transmittal Form 1096 and Form 1099 Copy A must be separately requested from the IRS. There is a separate penalty for failure to use the required red ink forms. However, if the taxpayer is a sole proprietor with a social security number, but with no separate Taxpayer Identification Number (TIN), Service internet software does not provide means for the taxpayer to obtain the required red ink forms. Currently, telephone requests for the required red ink forms are not answered by the IRS.
To prevent inefficiency and future draconian penalties, the information return statutes should now be fully repealed for all businesses with under $1 million annual gross income.
Cancel the 2005 Revisions to Bankruptcy law. On April 20, 2005, Congress authorized major changes in the existing bankruptcy laws, based on major lobbying efforts by banks, The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. 109-8. This statute has been recognized as fatally flawed by many legal experts, and should be repealed promptly to protect the national economy and individuals. The 2005 law serves the interests of the banks, and creates complex and unjustified new obstacles to debtors who need protection from banks. The obvious wealth and economic power of banks now requires new federal statutes to limit their influence and control. Enhance Consumer Protection. The current federal law fails to protect debtors from outrageous debt collection actions. To avoid federal penalties, a bank may now sell their credit cards claims to separate debt collectors, who typically violate with impunity statutes designed to prevent multiple telephone calls, elder abuse, and emotional distress. New statutes are required to make each bank responsible for illegal debt collection actions, so that the original creditor is held responsible for improper debt collection actions even after assignment or sale. This type of statute has proved successful for environmental pollution issues, wherein the contingent liability may not be transferred to a separate entity. Wealth Tax. New tax statutes are required to increase income taxes and estate taxes for extremely wealthy taxpayers. New forms of taxation, such as excise taxes may be required to avoid generations of persons with extreme wealth. It is basic that the very wealthy have a low propensity to spend, so that most of the funds of the extremely wealthy are not spent or invested to stimulate the economy. Global warming. It is not reasonably disputed that current trends in energy sources and use will result in unacceptable economic damages. The sea level rise by 20 feet is expected to result from a 2 degree increase in global temperature. The uncertainty is whether the 20 feet rise will occur in 20 years or 100 years, depending on major changes promptly required. Energy Issues. Major tax credits and investment incentives are now required to redesign energy sources and energy use Clearly, increased tax incentives are required to promote electric vehicles and increased use of solar power, wind power, and high technology approaches to new fuels, such as hydrogen peroxide derived from sea water through algae. Foreign Trade and Tariffs. It is easily proven that efficiency and national wealth results from minimal obstacles to international trade. Clearly, the recent focus on increases in tariffs is wrong, terribly wrong.
Aging Population. For many developed nations, population projections demonstrate a shift to more persons over age 65, and fewer persons in the labor force, age 20 through 64. Recent changes in the measurement of inflation will result in social security payments that do not keep pace with the cost of living. Immigration. The United States should welcome immigration, to increase the number of experienced workers needed in farming, construction, and maintenance. Training and education can result in skilled employees to perform high technology tasks. The immigrants can provide the needed balance in the age distribution of our labor force. Federal guarantees for large mortgages. Significant new legislation is necessary to improve access to large mortgages. In error, bank underwriters decline to approve large mortgage loans, despite high income and high credit scores. Traditional underwriter criteria is fatally flawed, so that new federal statutes are needed. In error, bank underwriters reject current and prior wages when paid through RSUs which are designed to reduce current income tax while providing high incentives for the employee, 26 USC §83(c)(1). In error, bank underwriters fail to recognize new forms of employee compensation, such as Restricted Share Units (RSUs) and payment in vested public stock. In error, underwriters count loan payment obligations for all persons who own properties as Joint Tenants or who are beneficiaries of property held in a trust, even though only two persons are signers of the promissory note. In error, bank underwriters count one-time capital expenditures as continuing future outlays. The combined results of these errors by bank underwriters results in bank rejection for loans for high priced houses, even for executives with very substantial income. For example, current bank practice is to reject loans for house purchases valued at $2 million, with a monthly payment of only $10,000, even though employee income is very substantial, such as $30,000 to $90,000 per month. A new federal statute is required for federal loan guarantees for mortgage loans of up to $10 million. Loan qualification should be based on a projection of future cash flow, in the form of a solvency opinion provided by an independent economist. In error, bank underwriters for large mortgage loans rely on traditional banking criteria, even rejecting loan guidelines by FreddieMac which are applicable for smaller qualifying mortgage loans. See: The Real Estate Settlement Procedures Act of 1974 (RESPA), 12 USC §2601 et seq.; Regulation X, 12 CFR §1924.
Private Party Prosecution of Bank Penalties. In violation of federal law, it is typical for a bank to require escrow tax payments that exceed the payments due over the ensuing twelve months, 12 USC §2609(a)(1). For intentional misconduct, the required civil penalty is over $1 million per day, 12 USC §5565(c)(2)(C). However, existing federal bank statutes do not authorize private prosecution of gross negligence by banks. Relevant court decisions hold that 11 USC §2609 does not authorize a private right of action. See: Hardy v Regions Mort. Inc., 449 F.3d 1357, 1360 (11th Cir 2016); Choudhuri v. Wells Fargo Bank, 2911 WL 5079480 (N.D. Cal. Oct 25, 2011). New federal laws are required to authorize individuals to prosecute wrongful acts by banks. Credit Score Errors. The credit score industry is essentially unregulated. The current federal statutes fail to prevent the current practice of erroneous credit scores, with no correction even after evidence is presented that the credit reports are incorrect. Unqualified Appraisers. Most current licensed appraisers are clearly not qualified to prepare an accurate property appraisal, due to lack of education, training and experience. These unqualified appraisers, although licensed, and would not qualify to testify in form of an opinion under federal or state evidence codes. Limits on Credit Card Interest Rates and Fees. New federal bank laws are required to limit interest rates, loan fees, late fees, and transaction fees. To avoid state limits on interest, it is common for credit card companies to establish their operations in a state that lacks effective interest rate limits. Bank interest rates for credit cards are clearly excessive. The charges to both retailers and credit card holders result in extremely high profits for banks, and severe economic damage to small business firms. Under current law, annual credit card interest rates may exceed 29 percent, although the current required yield for a prudent investor is less than 8.7 percent. New interest limits would stimulate the economy and would act to shift wealth from the banks to persons in the middle class. It is evident that banks now have excessive wealth and power. Federal guarantees on credit card debt could reduce credit card annual interest to under 2.0 percent.