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IRS Pushes for New Reporting at Expense of Privacy
angelheaded writes "Brian Krebs from the Washington Post is reporting that the Bush administration is proposing a new tax collection program that would force credit card companies to report merchants' income to the Internal Revenue Service. The plan has come under fire from privacy groups, who say it will create another private sector database tied to Social Security numbers at a time when ID theft experts are urging companies to wean themselves from the use and collection of such information."
They have always invaded privacy to collect money. Why is this news?
How would they figure the tax from the merchant's credit card revenue? They could have very high revenue, but low profits, or vice versa. You wouldn't be able to tell only from their CC processor history.
Seriously do we really need the extra tax dollars spent, man hours, and all that goes with it so the government can get more money?
I'll tell you if it doesn't pass, you will see it sooner or later under the guise of "searching for terrorist finances".
I am Bennett Haselton! I am Bennett Haselton!
The privacy issue is not a concern either. Even if it is a small business using the owner's SSN the IRS already has that info on tax forms, W2s, and other data they get from banks. This personal information will not be shared with anyone outside the IRS anymore than one's 1040 is.
It's been quite obvious in the last few years especially, that transactions on a credit card don't reflect "real" monetary transactions. How many people spend way more than they can afford, and pay back little for long periods of time. Also, it seems bad policy for a gov't to know how and where you spend money. There is no reason they should have record of that. Imagine the legal power of having records of the spending of a Senator for example. Imagine the blackmail power that would give the IRS.
Corporations commit egregious tax and accounting fraud and little to nothing happens. Once again the big thieves hang the little thieves...
I already report and pay sales tax from my income from credit card transactions.
And what the hell does the IRS care about my local city, county or state sales tax? Oh they want to make sure that I, as a small business owner, am reporting my income correctly? Fuck Off, I already do, audit me if you want you lazy fuckers, but stay the fuck out of my records unless you are doing an audit.
They can't possibly figure out my take-home income from credit card transactions anyway. They don't know if my expenses are 10% or 90% of those transactions, nor do they know how much of my business is cash or check.
Small businesses that want to hide income already know how to do this, they are cash only businesses. Allowing credit card transactions and avoiding paying taxes on that income is just asking for trouble. Well avoiding paying taxes in anyway is asking for trouble.
Let me and my accountant do our work and don't change a thing.
I can only see this leading to problems.
The Bush Administration is pushing for bigger government, great ... just great. He's a Republican too? I'm so confused.
Just as banks report interest income to the IRS, and employers report wage income, credit card merchant providers should report credit card income. It's income; you deduct business expenses on your return. Good way to catch tax evaders.
I'm not american, but don't understand the outrage. surely this is an attempt to 'catch' those people who are making a fortune selling stuff on ebay etc, without ever declaring the income through their business or paying any corp tax.
As a small businessman who pays every penny of tax as I should, I'm behind any method that helps catch those swine who can undercut me by not paying any tax.
Since when is it cool to stick up for tax cheats?
What am I missing?
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It has to do with identity theft. Given 2 or 3 pieces of information, of which your SSN is a critical piece, an identity thief can apply for credit cards in your name. They then run up huge debts, and you are left trying to prove it wasn't you. Good luck with that, the credit companies don't like to admit they screwed up. That SSN opens up your credit history, your government records, medical records, the time in grade school when you were suspended for throwing a rock on the playground, etc. So we tend to be a bit paranoid about them getting into the wrong hands.
I guess the IRS is following SlashDot's mantra that "information wants to be free."
The concern here, since it's aggregate transactions instead of every transaction (don't kid yourself, that day will come), is actually with identity theft as opposed to privacy.
(I'm distinguishing between the two in the following way, though someone can correct me if other definitions tend to be used: privacy reflects an individual's right to practice what activities he chooses without fear of persecution; identity theft reflects a criminal stealing your SSN and/or other data and building a phony life or racking up massive debt that is attributed to you.)
Using those definitions, the point being made is that this is an identity theft issue, because many small businesses use their SSN as their tax reporting number rather than an Employer Identification Number, especially for one-person businesses. So their SSN #s go into a new industry standard database, which is bad.
Privacy is still an issue, but more in a slippery-slope way: the amount of information the govt. is asking for will gradually increase as the framework comes into play. Though given what I've heard of how the IRS does software development, they may collect the data without actually connecting it to tax revenues in our lifetimes.
So when are they going to ban paper money and coinage?
---- Booth was a patriot ----
The only way large groups of people can function is with some transparency about who is doing what.
... well it doesn't hurt most people, aside from making you pay for your own parking tickets.
I ask those opposed to this sort of tracking: would you also prefer to eliminate license plates on cars? Those also create transparency about what car is where (or equivalently "reduce privacy" about what car is where). Nobody minds this great privacy reduction, since
Obviously you don't want to make everything transparent, but transparency has great benefits for making a social/trust system work, while privacy advocates only talk about the costs.
Because when Social Security was first introduced, a citizens anonymity was thought to be a god-given right. It was warned by "tinfoil hat wearing nut jobs" that Social Security was evil because it required an identity card. "Your paperss pleass".
My SS card, issued in 1968, says "For social security and tax purposes only - not for identification". The newer SS cards don't say that.
Now they're trying to do away with Social Security and keep the cards. The "tinfoil hat wearing nut jobs" were right.
Before long it will be a felony to not carry identification.
mcgrew's razor: Never attribute to stupidity that which can be explained by greedy self-interest
We the people don't need more government. We might not need any government at all, considering that all government seems to do is rob us, murder us, and indoctrinate us. Humans need society, but they do not need a government that acts like a parasite upon society.
I write sci-fi for metalheads
Not that I lose much sleep about privacy for businesses. I'm a business owner myself, in a highly regulated industry, subject to inspections and audits at any time. I have no expectation of privacy whatsoever. It would be simpler for me if I did have privacy, and I'd provide better service without regulatory overhead. But society won't unravel if corporations open their books to the IRS, or to the public, for that matter.
Now personal privacy, that's another story altogether. The gov't really shouldn't be peeking in my personal stuff without a warrant. Sixteenth amendment or not.
This will increase tax revenue (by catching the cheaters) and will save the law abiding people money. I think this is wonderful.
...our servicepeople are dying uselessly... Agreed, but on the other hand, they knew what they signed up for. I don't exactly think that soldiers dying is a crime. That's what soldiers do, they kill and die professionally.
...and yet this little asshole keeps his job. Thanks. Thanks a lot. Presumably this is why you think "Americans are weenies". What the fuck do you expect the citizens to do, march on DC and shoot the guy? Not gonna happen, buddy. He's a poor president, not a brutal, merciless dictator, and doesn't deserve that sort of treatment. We've done what we can. Just shut up, ride it out, and hope the next election goes more favorably for you."16MB (fuck off, MiB fascists)" - The Mighty Buzzard
Quack, quack.
Both parties want to control bigger pieces of the pie same pie(even in the very name of our interests).
The easiest way to wrestle more control of the pie is to make bigger pieces. Just keep watching.
Quack, quack.
Who said it's a surprise? It's "New Reporting", which is why it's "news". New things that are important are news (you can tell by the spelling).
What is this bizarre dismissal of important stories just because they are new developments that meet low expectations? Do you have something against people being informed that our worst expectations are being realized? Or are you Bushlike in equating your purely imaginary prior beliefs with their actual materialization?
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make install -not war
The IRS and its inevitable escalation of privacy invasions is one good reason why we should discard the income tax entirely, in favor of a sales tax. At about 25% (instead of income tax that's 20-35%), our $15 TRILLION economy would produce something over $3T, which (if we stopped pouring money into the Iraq War) would completely pay for even modern bloated budgets, without deficits (and probably with substantial debt paydowns).
Everything sold retail, with exceptions for a few "necessities", would be charged the 25% sales tax. The necessities would be raw cloth (not finished clothing, unless used and bought from a nonprofit collecting it from donations), raw food (groceries, not restaurants), health insurance, education, telecom (phone, basic cable, basic broadband), local average mass transit expenses, and home expenses on those primary homes costing (rent, mortgage, etc) in the bottom 20% of their Congressional District. Those homes would also have their median power/heat/light utilities exempted. The vendors would be the ones audited by the government, and responsible for ongoing tax collection, not the consumers, so the cost of the tax system would be part of the existing business accounting infrastructure. And violations would cause liens and seizures on the much more easily grabbed businesses.
Wholesale taxes for registered wholesalers would be a fraction of that 25%, probably closer to 1-5%. Equity sales not resulting in majority ownership transfer would be taxed at a rate of something like 0.01-0.001%, to encourage liquidity.
Congress could grant extra exemptions for subsidizing commerce it says the US is investing in, like home sales during housing busts or prescription drugs for seniors whose hardship is monitored by the government. But those arbitrary economics engineering projects would be easily pointed out for balancing against new debt when the government proposed deficit spending, rather than charge exempt people their fair share.
This system would put US taxation on a fair and supportable basis for the first time. Those benefiting most from the system that protects their ability to spend money on what they want would pay the most to keep that system working. Everyone would be encouraged to save, as income and savings aren't taxed. The poorest would have their prices on necessities lowered, but so would everyone else, without the government deciding how to redistribute that money among different people. And the simplicity, fairness and much smaller population (vendors) from whom taxes are actually collected would increase compliance and reduce tax evasion: the vendor won't sell you the goods if you don't pay, and they'll lose their business if their records don't add up.
But their records will be aggregated, not individual. The government tax authorities won't know a goddamn thing about individuals' private transactions, because they won't need to, and they won't have the raw data.
The IRS and the income tax will just keep getting worse. Even as it increasingly fails to either manage the economy by "exemption engineering", as we can see from its sketchy results (which usually just covers up subsidies to huge multinational corps), or to even pay the bills, as the ever-booming (especially lately) National Debt proves with more data than any other human endeavor ever measured. Sales tax will do what we want, without doing what we don't want. Let's have it already.
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make install -not war
Okay, honestly - I'm not seeing the problem here. The article states that the data would be tied to the main taxpayer ID listed for the company. It also states that many Mom and Pop shops forgo using a taxpayer ID and instead use the Social Security Number of the primary owner.
So the problem as I see it is there are a whole lot of incredibly lazy business owners that did not incorporate their businesses correctly. If their business is incorporated, it protects them from a whole lot of lawsuits and problems. It also took me a whole five minutes to find an online form that you can submit for an employer identification number which I believe can be used for tax purposes. The IRS site claims that it takes a couple minutes to apply and you receive your EIN electronically and can begin using it immediately. Ergo, no more social security number problems.
So why would have a credit card company store a database (which I really hope they have anyway so they can charge/make their own money) that matches up receipts with my taxpayer ID a problem? We can't help those who don't help themselves and get a taxpayer ID.
You have identified the problem with democracy right there: 51% votes that they get to rape the other 49%.
Most of Europe has a fine tradition of beheading rulers who try to abuse their power. We haven't done it for a while though, and it looks like the deterrent effect is starting to wear off.
I am TheRaven on Soylent News
I'm sure you understand, though.
Sincerely, Joe Six Pack
I just don't see a flat tax, IRS abolishment, etc ever happening. I would not want to imagine the lobbying effort to quash all talk about it. Think of all the accountants, bookkeepers, H+R Blocks, IRS agents, Tax lawyers of the country that will fight tooth and nail to destroy any common sense approach.
Paul and Hucklebee both discussed the ideas during the Republican primaries. Sadly those stories didn't get much traction to really get covered. It was a perfect opportunity to have a serious discussion about it but of course the media typically ignores any real issues .
When I went to get my fishing license this year, it was now impossible to get it without giving out your social security number at the store. They've asked for it for about the last five years, but when I refused, they sold me the license anyway. Now everything is done by a machine that phones home to a database. No SSN, no license. I decided to go to the fish commission office rather than blurting out my SSN to a clerk in a crowded KMart. I complained at to the fish commission while I was there, and they said they had no choice, as they were now mandated by the federal government to require a SSN to apply for a fishing license. Why, you may ask? The answer they give is that they want to track down Deadbeat dads. God help you if there is an error in the database, because then, I guess there's no fishing for you. I wonder how many years it would take to correct the error? So now my SSN is in yet another database. A database to which every store that issues fishing licenses has access. Let the hacking begin! The government needs to get out of the minutia of our lives. Members of cogress, ALL I WANT TO DO IS GO FISHING. PLEASE ALLOW ME TO DO SO WITHOUT TH THIRD DEGREE.
"Agreed, but on the other hand, they knew what they signed up for. I don't exactly think that soldiers dying is a crime. That's what soldiers do, they kill and die professionally." I can't believe anyone would say that except in very poor jest- I hope you're making a bad joke. Or perhaps there are a lot of callous, uncaring jerks like you that keep horrible people like Dubya in office. "Presumably this is why you think "Americans are weenies". What the fuck do you expect the citizens to do, march on DC and shoot the guy?" No you dunce. I expect people to stand up to the abuses perpetrated by this Administration. At the very least to denounce them. I expect them to hold their Congresscritters accountable and force them to do their jobs, which they seem to think is to rubberstamp whatever the White House wants. I expect them to have enough conscience and balls to stand up for what is right, instead of shrugging their collective shoulders and standing in the "who gives a shit" corner with dorks like you.
we will end no whine before its time
The end times includes a prophesy that it will be much worse than a felony to not carry identification, whatever form that takes is yet to be seen.
The "tinfoil hat wearing nut jobs" were right.It will be more than the tinfoil hat-wearing people who will be right when the end times arrive.
this nation, under God, shall have a new birth of freedom. -- Lincoln, Gettysburg Address
Around here, you can actually be arrested for not carrying some form of ID. I found this out a few years ago, when the police decided that they had sufficiently cleaned up the drugs and prostitution in a really bad part of town, and decided to arrest 400+ people on one street in one day for failing to carry an ID. It was some kind of misdemeanor charge, but the sad part is one day, what you've guessed will probably come to pass.
...and a couple of reasons come to mind:
1. I've never assumed transactions on my merchant account were in any way "private."
2. I report all income from verifiable sources, because the alternative (getting caught) is just not something that is within my risk envelope.
3. I use a TIN (tax identification number) in lieu of my SSN. TINs are free, so there is no reason for anyone to be using an SSN for their business. In fact, the IRS permits income and expenses from an LLC to be reported under the rules for sole proprietorships, which means you get all the bennies from a sole proprietorship but without having to plaster your SSN all over the place.
Really, there's nothing here.
While I fear we might get to this state.....can you or someone else cite the federal law stating that you have to have photo id for interstate travel? If so...I've broken the law a few times...
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Oh, so since we have massive problems, we can't afford a massive change. And it's not a change in how "economics fundamentally work", it's a change in how we fund the government. Fixing it, which by definition requires changing it.
Not only isn't encouraging everyone to save "necessarily bad", it's almost necessarily always good. Especially since America's savings rate has finally fallen to negative savings, on average, across 300 million people. That's a catastrophe, and fixing that would be a top priority, even if it didn't also fix our government funding catastrophe.
The businesses that go broke when markets for products that people buy because they can put off paying their taxes, at higher rates (to compensate for the corporations that usually pay no taxes) are the businesses that make our economy less efficient. I'm not going to miss subsidizing them. That's business: winners and losers. Except when they're propped up by a broken system, which makes everyone a loser at the expense of bad business.
Of course there will still be tax evasion, real theft and some fraud. But since the points of collection are both much fewer and already include accounting as a core competency, there will be much less. But I suppose that "better" isn't good enough. We should just stay broken until the magic perfection comes down, and then everyone will get a pony.
If America can't support its expenses on taxing domestic purchases because there's too much foreign purchasing without taxes, then of course we should tariff it. The restraint on free trade from tariffs comes from disadvantaging imports vs domestic goods. If the domestic goods are all burdened, but foreign ones aren't, then the unfair trade is working in reverse, and tariffs are necessary even without the benefit of stopping tax evasion, just to level the playing field.
Besides, if you knew anything about current economics, you'd know that the US dollar is becoming worthless for buying imports, with no letup in sight.
But then, if you knew anything about economics, you'd know that replacing the income tax with a sales tax wasn't invented by Ron Paul. And you wouldn't have said any of those other ignorant things about economics or government finance, especially not in a tone like you know everything, when everything you said was dead wrong. Anonymous squanderer Coward.
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make install -not war
Figuring out a good system to move to is different than what it takes to get there. One part of what it takes is figuring out a good system, which we haven't yet.
But the fact that the #2 and #3 finishers in the Republican presidential primaries each proposed sales tax and IRS abolishment means that in fact the notion has plenty of traction among the people, even if not yet in the corporate mass media. That media doesn't get to say whether we continue the discussion among ourselves, in interactive distributed media like this website. And since you and I come from different directions, and are discussing it on a tech blog, but already are somewhat sync'ed, I'd say that things are moving along at a fairly encouraging pace. Republican presidential candidates don't do innovation: they just latch on to what is already popular among a desired constituency, and try to pitch it to a larger audience, and take credit for it. That's how all economics, no matter which route through which party, is turned into policy.
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make install -not war
OK, businesses, if you're taking in credit card income, you need to report it. The cash, if you don't report it, is harder for the government to trace. It's also harder for the IRS to prove a cash income.
Take the case of Al Capone, the famous gangster who ran Chicago. He was not convicted of racketeering, running prostitutes, murder, and a whole host of other crimes with which he is normally associated. Capone was convicted of tax evasion. But Capone could not ever have been convicted were it not for E.J. O'Hare, a bookkeeper who led the feds to the records kept on Capone's businesses.
In the case of credit card records, businesses simply cannot hide from the fact that external agencies keep records of one's credit card receipts and the bank account into which these receipts are deposited. If your business is not making money, you need to keep close records of your expenses. The IRS will go after any records it can get its hands on to prove income over expenditures. And they're especially interested in squeezing now due to the temptation all businesses have to underreport income during a recession.
Gods don't kill people, people with gods kill people.
Well then they're not asking for any more info than they'll already get when they audit you.
However, if they have this info they can automatically get a list of all business which report less sales than they had on CCs alone, and audit those first.
You might think that not reporting income from CC transactions is dumb, but there are people doing it right now. I'm not in the US but you'd be surprised if you knew how many people do it here.
Let's put this rather simply:
The IRS wants to know how much money credit card companies are transferring to individuals so they have a minimum lower bounds for the seller's income.
It's useful because it increases the amount of under-reporting of income that can be automatically detected. Seriously, what they'll do is run compare the income reported against the income reported by the credit card companies and anyone who's personally reported income is less than what the credit card companies said they paid them will be audited.
Whether they can or will do anything else with this is questionable.
Fanatically anti-fanatical
Wikipedia leave me clueless as to what a TIN is. Terrorist Identification Number?
mcgrew's razor: Never attribute to stupidity that which can be explained by greedy self-interest