Russians feared the KGB.
Germans feared the Gestapo.
East Germans feared the Stasi.
Americans fear the IRS.
Posted on 03/14/2010 3:59:46 PM PDT by jsh3180
Internet sellers who don't report their sales will no longer be under the radar. Starting next year, any bank or other payment settlement company that processes credit cards, debit cards, and electronic payments such as PayPal will have to issue information returns telling the IRS what merchants receive. The new returns are Form 1099-K, Merchant Card and Third-Party Payments.
Purpose of Reporting The IRS believes that many online sellers fail to report their transactions. Some don't report because they mistakenly believe that Internet sales are invisible. Others do so because they are trying to evade taxes.
The IRS has found that using information returns, such as W-2 forms for employees, Form 1099-MISC for independent contractors, and Form 1099-INT for bank interest, goes a long way toward improving the reporting of income. IRS computers can match income reported on these information returns with the income reported on tax returns.
Who's Subject to Reporting All merchants who accept payments through credit cards, debit cards, gift cards and PayPal will receive information returns telling them - and the IRS - the gross amount of the merchant card transactions. This will be broken down month by month. While the form uses the word "card," the IRS has made it clear that this is interpreted broadly to include third-party network transactions (i.e., PayPal).
Exception: Very small merchants won't be issued information returns. "Small" for this purpose means annual gross sales on merchant cards of no more than $20,000 or 200 or fewer transactions. In other words, reporting is required only if gross amounts for the year exceed $20,000 and there are more than 200 transactions.
Mechanics As it now stands (proposed regulations have not yet been finalized), gross amounts reported for merchant transactions do not take into account any adjustments for credits, cash equivalents, discount amounts, fees, chargebacks, refunded amounts, or any other amounts. It will be up to sellers to report on their returns the full amounts reported to them and then make adjustments or explanations to account for differences in what is ultimately taxable to them.
For example, a seller who is paid $1,000 by credit card for a particular transaction does not necessarily have $1,000 profit even though $1,000 will be included on Form 1099-K. The $1,000 must be reported so the return will match what's in the IRS computers, but this amount will then be reduced on the merchant's return by the cost of goods sold (what it costs for the inventory sold), merchant account fees, and other costs.
Providing Your Tax ID Number to Processors Merchants will have to provide their federal tax identification numbers to the companies processing their transactions. If they fail to do so, they may become subject to "backup withholding," which means these companies will have to deduct and withhold income tax from reportable payments. Backup withholding won't go into effect until 2012.
Sellers who don't wish to provide their social security number to payment processors can obtain an EIN (Employer ID Number). Note that you can obtain an EIN even if you are a sole proprietorship. See the IRS website for more information.
More information on Form 1099-K You can find more information about Form 1099-K, the new information return that payment settlement entities will use to report the gross amount of merchant card or third-party payments, on this IRS web page (PDF format).
Sell your EBay stock today.
Maybe they are just trying to avoid them ala Timmy G.
This must be some of Barry’s $green$ jobs we keep hearing about.
The IRS should be FORCED to focus on the GRAFT in Congress and the STATE HOUSES.....NOT the American Tax payer and Revenue GENERATOR!
just another way the Obama administration is trying to kill off business in America.
We need to get rid of the IRS.
This sucks.
The internet is a wonderful device for laundering money,for getting money into terrorist accounts and shifting it from pocket to pocket
Watching the flow is a step to curtail that flow
Mark of the Beast. “He might not buy or sell, save he had the mark...”
It’s a logical step that next they track everyone’s debit/credit card purchases and track expenses vs. stated income.
However, unlike debit/credit cards, no one can find out the precise items purchased + precise identity of the purchaser when CA$H is used. I like cash.
Looks like what little Ebay/Paypal I do is going to be shut down after all. I remember when Ebay was fun and somewhat profitable.
Considering every paypal sale I make is based upon a loss, it’s going to be fun getting cash back. Thanks, taxman, thanks.
From the start the war on drugs has been nothing but a ruse by which to strengthen the tax system at the expense of our liberties. Unwarranted bank account snooping began with the so-called Drug Kingpin Act of 1986.
This is why I’ve told my husband to get cash out of the bank to pay everything possible. We don’t use credit cards. I don’t want our privacy invaded in the future.
Democrats use that fraud to buy votes.
Why would they do anything to upset that?
Sellers will start only taking money orders.
This is going to be a huge PITA for us. We have an internet-based business and we always report every dime we make to the IRS.
Now the accounting for it will take even more time.
I already spend too much time doing accounting for the IRS. A flat tax cannot come soon enough for me.
Russians feared the KGB.
Germans feared the Gestapo.
East Germans feared the Stasi.
Americans fear the IRS.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.