Small businesses threatened with 1099 tax form tyranny provision in health care bill

According to a recent report from CNNMoney.com, the massive U.S. health care system overhaul includes more than just a transition to government-run medicine. A small section hidden away in the 2,409-page bill requires all businesses to send 1099 tax forms to every company or individual from which they purchased more than $600 in services and goods throughout the tax year, beginning on January 1, 2012.

As you'll see below, this new law threatens to cause a wave of paperwork chaos across the entire U.S. economy, stifling the operations of small businesses and driving more jobs overseas.

Here's why...

For those of you who aren't familiar with a 1099, this tax document is typically issued to independent contract workers who receive payments for work they've done. "Employees" of businesses are issued W-2 forms at the end of the tax year while independent contractors and other freelancers making money outside of the wage structure receive 1099 forms.

But the new change (conveniently slipped into the health care bill that nobody actually read prior to voting on it) drastically expands the scope of 1099s. Not only will contract workers be receiving them, but so will millions of individuals and companies that receive more than $600 in payments for services and products they provide throughout the tax year.

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