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IRS To Go After eBay Sellers
prostoalex writes "Fed up with numerous violations of tax law by individuals and businesses selling goods on eBay, Amazon Marketplace, uBid.com, etc., IRS is pushing Congress to make online marketplaces responsible for reporting the sales information to the tax man, in order to prevent under-reporting of the income. eBay's 'own statistics suggest that there are 1.3 million people around the world who make their primary or secondary source of income through eBay, with just over 700,000 in the United States', News.com says." How long before the same fate befalls the folks who make a living working the Massively Multiplayer secondary markets?
They'd be doing this regardless of who is in office. It's what the IRS does...it goes after people who avoid paying taxes on income. As for your gratuitous statement about who will and won't pay the taxes, you do know that 79% of the tax burden is carried by the top 20% of income earners, right?
Maybe for once we should stop being partisan and take a good honest look at these issues rather than using them as a soapbox to attack one side or the other on the political spectrum.
As for the topic...as long as our tax code doesn't get fixed this is entirely correct of them to do. And as for those selling MMOG goods, I hope they all get audited. I pay my taxes, and a healthy amount of them. Why should some guy making $50,000 a year selling Ultima Online gold (for example) not pay any?
Sales tax in the US is a State (sometimes with an additional % or two for the county) tax. The IRS is in charge of Federal Income Tax. You are comparing apples to oranges.
However, I do agree that our whole tax code is messed up. A flat or consumption based tax would reduce the size of the IRS by an order of magnitude, save taxpayers billions spent on accountants and tax software, and probably bring in more overall revenue than the current system.
The Tax Code is more about power and control than it is about money.
wow. The war in iraq must be getting dicey if we are chasing after the income of less than a million people.
Why should that surprise or amuse you? All of the talk about how the "rich" should pay more taxes is talk about a lot less than 1 million people. And, um... why focus on DoD spending? What about people who buy their blood pressure medicine with money that was taxed from you, rather than just eating fewer cheeseburgers and giving up smoking (especially since the cigarettes cost more than the dose of statins anyway!)? Taxing income is taxing income. People who specifically look for a way to run a retail business that will, at least temporarily, get them around paying taxes are deliberately trying to get away with skipping something the rest of us aren't. Why would it make you "chuckle" to see the government trying to keep up with an obvious, and very huge, segment of the evolving economy? I just bought something from an eBay-centric retailer the other day, and the company had completed over 50,000 auctions. Would you rather that that person's income tax obligations were just pushed over onto someone else who just happens to be running their own shop in a more traditional format?
If you're just for lower taxes in general, then why aren't you arguing for completely universal tax enforcement so that your share (and mine, and everyone else who does the right thing) of taxes CAN be lower, as they then could and should be? Anyway, nice flamebait. I'm sure you had to go to a special school to perfect that really smooth disengenuous, ironic tone. Were you able to write that cost off your taxes?
Don't disappoint your bird dog. Go to the range.
Perhaps if more people are exposed to the unpleasantness of taxes on their de facto small businesses, then more people would vote for candidates that include tax simplification as a key goal. The current U.S. tax code is a Byzantine mess that is great for accountants, tax attorneys, and tax software companies who add no value to society other than to comply with artificially enacted arcana.
I have no problem paying my fair share (and think everyone should), but I hate that I have to spend so much money and time dealing with all the rules, forms, and administriva of compliance.
Two wrongs don't make a right, but three lefts do.
You are comparing present state of affairs of USA to some sort of ideal utopian society and find it wanting. I am comparing the very same USA to present state of affairs for 80% of the world population. In most developing nations, property crimes are rampant, people are poor and the temptation to buy stolen goods at 50% off is very very high. Very clearly you have not lived outside USA.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
If you're an average person selling off unwanted stuff on ebay and buying the junk you want instead, then you aren't going owe income tax. You already paid income tax on the money you made to purchase your junk years ago. Most of it has not appreciated, to put it bluntly. If the IRS were to start playing hardball and try to tax you on the sale as Capital Gains, you would play hardball right back and show them your original basis and then the IRS would owe YOU for your loss. Likewise if they tried to call it ordinary income -- you're selling it at a loss, so no income. And then you'd started claiming your ISP fees as business expenses, and you'd take the home office deduction for the space you use to photograph and package your old junk. So the IRS won't come after ordinary "garage sale" type transactions.
Natch, this wouldn't apply so much to someone whose business is turning stuff over on ebay. They could be taxed on income the same way the corner store is, because they are presumably making a markup by buying wholesale and selling retail.
There's some unwritten rule about not stealing outdoor furniture and stuff like that. Even when my wife was my girlfriend and was living in a "bad" neighborhood, no one ever messed with her porch furniture. Sure there was gunfire in the hood, and her landlord's maintenance guy was murdered a few blocks away. And her house was broken into and her laptop stolen. But the porch furniture was always left alone.
I am not a crackpot.
So who has receipts going years back for garage sale-type items they're selling on eBay? Sure, going forward, we can all keep every receipt, but cleaning out the basement could be a taxable event now. Of course, all this kind of thing will do is drive people to dump things into landfills rather than deal with the hassle.
I too have felt the cold finger of injustice.
Simple. Your grandmother needs to start keeping very detailed records. She must prove to the IRS she didn't make $12K. I don't see the problem, other than her hobby became more detailed.
However, I do agree that our whole tax code is messed up. A flat or consumption based tax would reduce the size of the IRS by an order of magnitude, save taxpayers billions spent on accountants and tax software, and probably bring in more overall revenue than the current system.
Actually it would replace one set of convoluted rules and tax avoidance methods with another.
For example, some proposals suggest only taxing the final sale price to the end use; not the sale of goods required to produce an item. So a house, for example, would be taxed when it was first sold, but the lumber, etc would not be taxed when the builder bought it. While this makes sense on the surface - you only tax the items once; the goal then becomes to either:
1) lower the sales price as much as possible while still getting the desired cash. So, for example I build a home and then take out a $500,000 mortgage on it - which I get in cash. I sell you the house for a dollar and you assume the $500k debt. The government collects tax on a dollar, I have the desired cash and you avoid a large tax bill. This was actually a way to do a tax free sale of assets in the US until the Feds outlawed it via the tax code.
2. find a way for the ultimate end user to be the builder and never sell the house. So I form a corporation for the express purpose of building a home and hire a contractor to do so. Once the house is built I occupy rather then sell it. Since the first sale has not occurred I have not incurred any tax liability. When I go to sell the house I sell the corporation which owns an asset - so unless you tax sales of corporations as well I make a second tax free transfer; or I do 1 above as part of the sale.
A "Fair Tax" as some propose on consumption will not simplify the tax code; all it will do is cause smart people to find new loopholes that Congress will then try to close.
A secondary effect is the impact on such things as home sales - new homes would have to sell for less than existing ones since they would be taxed and buyers tend to look at the final price, not the one "before tax" price.
Of course, Fair Tax advocates simply ignore these points when making their argument. I set next to one on a plane flight, when he brought up the "Fair Tax" and try to sell m e on it I started asking about these things - his response was to get upset and say the details weren't important. At least I shut him up so I could enjoy my book.
I'm a consultant - I convert gibberish into cash-flow.
'' This is EXACTLY what is wrong with our system. If you make money then you are a business or hobby and get taxed but if you lose money then it's a different game. You can't be a business and STILL have to pay taxes as they want to tax anything over $600. ''
You haven't thought this through. So you think anyone with a money losing business should be able to deduct their losses from tax. Well, apart from my normal job I run a few businesses. One business is selling reviews of CDs, DVDs and videogames. Had a lot of cost for buying all those CDs, DVDs and games, spent lots of time listening to the music and watching the DVDs, and didn't make one cent from selling the reviews. My second business as a restaurant reviewer makes losses as well, and so does my third business as a holiday resort reviewer.
Let's say that you individually make $60,000 a year on ebay, and you skip out on the income and sales taxes. Assuming a 20% federal income take (as this is likely in addition to your regular job) and a 10% state income-and-sales take, that'd be $12k that the federal government either has to do without, borrow, or get from the rest of us, and $6k that your state has to do the same with.
Tax policies aside, it's just a rule of law thing. the law says pay the tax, so you pay the tax -- and if you don't like it, you get off your ass and work to change it.
The problem is that she has to keep very detailed records. Running your own swap-meet garage-sale thing on-line is fun. Keeping detailed records for the benefit of a bunch of pathologically corrupt, parasitic government scum is not just un-fun; it's infuriating.
-FL
She must prove to the IRS she didn't make $12K. I don't see the problem,
So you are OK with the government making allegations and the accused has to prove them false?
Well if that's your belief so be it. But when the government crashes down your door and accuses of oh say rape, murder, or treason and you have to prove your innocence instead of them proving your guilt, don't whine about getting screwed.
My Suburban burns less gasoline than your Prius.
be a little realistic. the irs is not going to go after anyone selling off an old laptop or the flotsam and jetsam of everyday life. mailing the letter asking for the taxes on the sale of a pair of old sneakers would likely cost more than the taxes collected. and if they have even a small fraction of taxpayers substantiate their original purchase price and selling costs etc. the total effort won't be worth the tax collected.
more likley, the irs wants to capture taxes on income from undocumented businesses - that is, people who sell stuff on e-bay on a continuing basis by making things to sell (like soap, homemade tomato sauce, etc) or who buy things from local wholesalers for resale on e-bay.
the pitfall i see for the irs is that it's actually rather expensive to do business on e-bay. unless an e-bay seller's product has a huge markup, the actual profits are rather small, if there is any profit at all. the irs may create a hugely expensive documentation requirement for itself as well as e-bay to generate very little in the way of tax revenue. it would be a disaster if it cost more to collect the taxes than the tax revenue generated.
when religion is no longer the opiate of the masses, governments will resort to real opiates.
I for one am in favor of this move. Not because I think people should be paying more taxes (When people are going to great lengths to avoid a tax, it's a sign that tax is unfair. Nobody should be paying income taxes that makes less than $100,000 per year.) but because this might do something to prevent the rampant fraud we see on eBay. The fraudsters aren't likely to want to pay taxes, and collecting taxes will probably require eBay to collect more information on sellers, which will reduce fraud. Especially if eBay faces financial penalties for not properly collecting tax revenue.
Here's hoping.
And your approval of what the government spends it on should be reflected in your voting, not tax fraud.
People who think they know everything really piss off those of us that actually do.
You would need to keep good records to show that you didn't "make" money on the sale. In your case I would think you could actually report a loss of $100 and that would reduce your taxable income. Keep in mind that I'm not a tax expert or even a tax newbie...
You said it. The problem with all this is ebay reports to IRS that you sold something for $50. What they don't report is that you paid $300 for it, used it, didn't like or need it and are now selling it for $50.
It creates a whole new accounting nightmare for everyone.
What's next, if you sell your old stereo on ebay or craigslist for 75% off that is somehow "income"? What about when you sell your used car? Is that income now?
It's just nuts. I hope congress quashes the whole idea.
Not that professional ebay sellers shouldn't declare their sales, they should.
But there is a difference between that and selling your old stuff at a loss.
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