Tucked away on page 344 of the 2,000+ page House-passed health care bill is an innocuous looking provision titled, Section 533, Expansion of Information Reporting Requirements. Section 553 would add two new subsections to Section 6041 of the Internal Revenue Code and could potentially have a greater impact on America’s businesses than some of the proposed health care changes.

Under current law, a business taxpayer making payments to a service provider (the payee in IRS language) aggregating more than $600 or more for services in the course of a trade or business in a calendar year is required to send an informational return to the IRS and to the payee setting forth the amount, as well as the address of the recipient of the payment, generally on the Form 1099.

In less than 27 lines of legislative text, this one section in the health care reform bill would extend the Form 1099 filing requirement to ALL vendors (including corporate) to which they pay more than $600 annually for services or property. This proposal would take effect in 2013.

Consider all the payments you make in the course of your business for property, such as computers, software, office supplies, and fuel to services, including janitorial services, coffee services, and package delivery services. If you paid more than $600 over the course of the tax year, you’ll need to file a Form 1099.

Did the roundtrip ticket for your air travel to the ACCA Annual Conference cost more than $600? If you answered yes, then you would have to issue a 1099 to American Airlines. This enormous impact will hit all businesses, but especially small businesses that don’t have a large administrative staff.

Don’t forget that in order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold on your payments.

Section 553 is a solution in search of a problem. It was conceived to raise revenues to offset the costs of the health care reform proposal by closing the “tax gap” caused by the underreporting and nonpayment of taxes. There is a belief that business tax compliance would increase with third-party information reporting.

Some estimates say this will create an avalanche of hundreds of millions of Forms 1099 filed with the IRS. Odds are inadvertent mistakes will be made on those forms, triggering audits and notice of non-compliance from the IRS.