By Jay Heflin - 07/08/10 04:08 PM EDT
The requirement "may turn out to be disproportionate as compared with any resulting improvement in tax compliance," Olson's report states.
Her organization plans to study the effect of the requirement on businesses and might propose modifications to make it less burdensome.
Rep. Sam Graves (R-Mo.) is also concerned about the mandate's effect on companies.
Last month, he sent a letter to IRS Commissioner Doug Shulman asking him to explain how his agency would enforce the new rule, which is slated to take effect in 2012.
Graves argued the requirement will be difficult, if not impossible, for not just businesses to comply with, but also the IRS.
"This provision will result in an enormous number of additional 1099 forms being remitted to the IRS, increasing the processing demand on IRS employees and straining the IRS infrastructure," Graves wrote, adding, "Realistically, it is difficult to envision how this paperwork burden could be implemented."