The Senate has the opportunity Tuesday to undo some of the damage inflicted on small businesses with the enactment of the Patient Protection and Affordable Care Act. The 1099 reporting mandate included in the bill — which changes the tax filing rules for business transactions with government, nonprofits and businesses of any size — creates both mountains of new paperwork and a slew of unintended consequences.

[IMGCAP(1)]Under law, a business that purchases more than $600 in services from a self-employed independent contractor during a calendar year is required to file a 1099 form with the IRS disclosing the name, address, Taxpayer Identification Number of the contractor, and amount paid. Purchases of goods or transactions involving corporations are exempt from this reporting requirement.

This will change dramatically in 2012, when new reporting requirements come into effect. Businesses will have to keep track of all purchases not made with a credit card that exceed $600 in a calendar year. This includes goods as well as services and also applies to purchases from a corporation. If, for example, your business buys $600 in office supplies from a single retailer, you will be required to file a 1099 form. Multiply this by the number of vendors that you do business with and you have a big headache.

It’s easy to imagine rooms full of receipts and 1099s, all of which must be filed appropriately. This requirement will make accounting exponentially more burdensome, and it will force small businesses to divert scarce resources from serving customers and creating jobs to bookkeeping and tax filing. If this sounds like a recipe for disaster, that’s because it is.

The new reporting requirement may also cause businesses to run into problems with the IRS. If the revenue reported to the IRS on 1099s doesn’t match with company reported revenue, the vendor could be subject to a costly and time-consuming IRS audit. And with 40 million entities required to file 1099s under this rule, it’s not hard to imagine that mistakes will be made.

In addition, Nina Olsen, the IRS taxpayer advocate, has made it clear the IRS has no capability to process the forms and it probably won’t result in revenue for the federal government. In other words, the provision creates nothing but headache and heartache for small business owners with no benefit to the deficit, let alone to health care reform.

These rules may also cause businesses to limit the number of suppliers they use in order to cut down on paperwork. It’s possible that small businesses — which offer a narrower range of goods and services — could be left out in the cold. This isn’t good for anyone.

To remedy this problem, the U.S. Chamber of Commerce is urging members of the Senate to support Nebraska Republican Sen. Mike Johanns’ amendment to the Small Business Jobs Act, which would fully repeal the 1099 reporting provision. This is a common-sense solution that will undo a manufactured problem.

Another amendment related to the 1099 mandate — sponsored by Sen. Bill Nelson (D-Fla.) — would make the reporting process even more complicated, and it should be defeated. The Nelson amendment would create additional burdens on small businesses to determine at what point they have exceeded the 25-employee threshold that triggers the full force of the mandate when hiring full-time, part-time or seasonal employees. The amendment would likely discourage job creation because the full cost of compliance must be accounted for when exceeding the threshold.

There is only one sensible solution to the challenges posed by the 1099 reporting mandate: total repeal. Congress should act swiftly so businesses can focus on what they do best — providing goods and services, creating jobs and stimulating economic development. If policymakers fail to act, they’ll be putting the brakes on badly needed job creation.

R. Bruce Josten is the executive vice president for Government Affairs at the U.S. Chamber of Commerce.