Sorting Fact from Fiction on Health-Care Reform

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More information on the tax credit is available at the HHS website, and from the IRS site.

Concern: Small businesses will be required to issue 1099s to all vendors.

Reality: True. In an effort to close the tax gap, all companies will be required to issue 1099 tax forms to any vendor upon whom they spend $600 or more annually. This includes the deli catering your company meetings and the stationery store where you buy envelopes. It is likely to double accounting costs at some small companies, Hanley says.

Caveats: This provision goes into effect in 2012 and may be overturned or limited before then. "I hope so," Alter says. "It's great for payroll companies like mine and for office supply companies that provide the forms, but it's another administrative headache for small businesses that they really don't need."

Currently, 1099s are issued mainly to independent contractors and service providers. Broadly extending the requirement will mean that entrepreneurs who have never issued 1099s will likely have to send out 15 or 20 a year, Hanley says. Larger companies may have to mail out thousands of forms, undercutting government paperwork reduction efforts.

Concern: Medical insurance benefits will be taxed as income.

Reality: False. Taxing medical benefits was discussed as a cost-saving option during reform negotiations, but in the end the idea was dropped. The myth, however, lives on. "I get asked this every single day" by both individual and entrepreneurial clients, Hanley says. "They worry that they or their employees will have to pay taxes on whatever amount their health care benefits contribute to their income."

Caveats: The cost of health-care benefits must be listed on the W-2 forms business owners issue to their employees, starting in 2011. This will probably further the confusion. "People panic and think that anything listed on their W-2 is taxed," Hanley says. The cost will be listed for informational purposes and to insure that companies with 50 or more employees are indeed offering insurance, he says.

Want to read relevant portions of the health-care law itself? The Henry J. Kaiser Family Foundation has a site where you can call up specific portions of the law (just "employer requirements," for instance) that may apply to your company.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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