A warning was given by Internal Revenue Service watchdog stating that the paperwork load on small businesses may overbalance the profit of tax collection which is generated as a part of the new healthcare law.

The IRS Taxpayer Advocate Service in its mid year report to Congress expressed that in the starting of 2012 for around 40 million charities, businesses and other entities should report to the IRS payments that they make to service providers and providers.

The more information is being provided to the IRS by reporting regime to help in tax collection from the vendors. As per the report, it could interrupt commerce and which the IRS systems are not that equipped to utilize the information.

In order to cover incorporated service providers but also vendors of goods, the healthcare law was expanded. Self-employed individual who is paying the same vendor of more than $600 for equipment, office supplies or other consulting services in the same year must now generate a 1099 form for that vendor and it should be sent to the IRS.

As per the announcement made by IRS, the businesses need not report payments made by credit-card and these payments would be taken up by another regime for reporting.

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