Much debate has raged over the impact President Obama’s new universal health care law will have on business. To date, most of the analysis has focused on the impact the rule will have on businesses’ insurance and benefits costs. But a little-known tax-reporting provision in the law could be far more costly and burdensome procurement and tax functions.

In an effort to pay for the health care program, the law will require businesses to file a 1099 tax form each time they spend more than $600 a year on goods or services from any supplier. The Feds estimate the provision will raise $19 billion in tax revenues by making it harder for businesses to under report income. Yet, when you consider needing to file a 1099 for everything from a single airline ticket to a customer dinner to weekly lattes from the corner cafe, the reporting costs and paperwork burdens seem overwhelming.

Case in point: a procurement exec from the financial services industry this week quipped that the provision add “…at least three more FTEs” to his team solely focused on reporting compliance.

Attempts to repeal the rule in Congress have yet been unsuccessful. And inside-the-beltway wonks don’t expect the provision to be overruled anytime this year. With the risk of Congress not getting the votes to undo the order, what can you do to be prepared should the rule go into effect?

• Improve visibility into spending: at most companies, spend data is tied up in multiple, disparate systems within and outside the enterprise — from purchasing to ERP to P-card systems. Accurately reporting on even the smallest purchases requires efficiently aggregating line-item spending information from all sources, classifying this data to a standard schema, and enriching it with other business intelligence (e.g., a supplier’s parent-child relationships, minority-woman-owned-business-status, etc.). Industry research indicates that automated spend analysis solutions provide companies with the structured data and reporting needed to improve compliance 25% - 50%. Get more details on how to develop an effective spend visibility program in this Aberdeen Group report. Get a better understanding of available spend analysis solutions with this Gartner-AMR Research report.
• Improve accuracy and timeliness of supplier information: According to AMR Research, managing supplier information manually is a costly drain on business - in some cases more than $1,000 per supplier annually. When using a supplier information management system, cost per supplier falls to below $150 annually. In addition to line-item spend information, 1099 forms require more detailed company information on suppliers, including tax identification numbers. Gathering this information is challenging enough. But keeping it current for accurate and timely reporting can be downright daunting. A growing number of procurement organizations are addressing this challenge through the use of supplier information management solutions, which use Web-based portals that initially enable suppliers to self-register and, once approved, prompt suppliers to maintain their profile, certification, and other information up to date. Such solutions ensure key supplier information is accurate and available when you need it for 1099 reporting purposes. They also can proactively alert you to potential issues with supplier insurance documentation, MWBE status, or other required certifications. And it can free your procurement team to focus on managing the relationship; instead of chasing down data. Learn more about supplier information and performance management here.

While the new 1099-reporting rules will most certainly be a hassle for procurement organizations, taking steps now to improve the quality and efficiency of spend and supplier data will prepare you to handle the new tax-reporting rules in stride.