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."

Comments

Surprise?

[mh1997]

IRS Pushes for New Reporting at Expense of Privacy

They have always invaded privacy to collect money. Why is this news?

Re:Surprise?

[sumdumass]

You know, I don't see how this is any different then requiring an employer to submit a 1099 for contract workers and other similar paid people. I mean the changes are so it reports the total amount of sales (income) a merchant or business owner has made through a credit card account. It would almost be the same as the card companies issuing a 1099 to the merchants.

The call to arms about social security numbers is a little weak too. I mean it isn't like the US government (IRS) doesn't already have the numbers when anyone else does a 1099 or they report their own income. All that would be necessary is for another field in an existing database to be set with a "credit income" tab or something and treat it like all other IRS information.

The people who are really at risk here are the ones who sell things on line and don't report it to anyone. That is why there is a big problem with it. Now, If your going to be doing any business with people paying you by credit cards, your going to have to report it in some way. The fact that small businesses use their SS number as their TIN number is sort of irrelevant, the IRS would already have that information anyways. The credit card companies would already have that information stored for a year or more anyways too. The only difference now is whether the government gets information on the amount of sales you do by credit cards or not. That is the only material change in this.

Worthless data...

[SoCalChris]

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.

Re:Worthless data...

[SoCalChris]

Not to mention that it does nothing with non-CC transactions, making this even more worthless.

Small businesses that are cheating on their taxes will still cheat on their taxes, this does nothing to help that. It only adds another layer of government involvement, and another chance for data to be lost/stolen/misused.

Re:Worthless data...

[Col. Klink (retired)]

Small business owners file 1040 Schedule C. Pari I, line 1 is "Gross receipts or sales."

Re:Worthless data...

[mckinnsb]

Regardless of what they say publicly, my guess is that they are probably seeking the information not just to keep tabs on the merchants, but to keep a better lock on consumers. A lot of consumer capital goes through small business owners, that might be the people you buy groceries, liquor, cigarettes, sandwiches, meals, etc from. You do have to report how much money you earn every year, but you *don't* have to report what you spend it on (unless you write it off or it meets other specific criteria). I'll get to why that is important, later.

They can retrieve this information because from what I have gathered, they are proposing to withhold the actual receipts of sale, and the receipts would contain information regarding the two parties involved in the transaction -when, where, how much, and possibly why.

Granted, they are only proposing to hold 28% of these receipts, so this would by no means be a comprehensive or continuous record of consumer activity, but it could be used in a red-flag "Monte-carlo" algorithm-type approach - pick a few of the receipts, try to look for a few fishy ones by passing them through a filter, and then investigate (audit) any receipts that match that criteria.

For example, certain things don't need to be reported to the government when sold to an independent merchant (or even a larger business). If the seller makes a profit on the sale (assuming the seller doesn't own a small business or the sale is not related to his business), that profit is essentially invisible to the government. While in some cases this profit is taxable or not taxable (depending on what you sell) this law would make those profits visible, and would make the taxable things visible and thus enforceable. It would give an argument in Congress for those currently nontaxable profits to become taxable through an "ease of enforcement" arguement.

That being said, I don't really think the government needs to tax more than it already can and does, unless I start to see some dramatic increase in what I get out of my government, and honestly, we have other things we could be spending our money on. I'm really not worried about a business owner taking a few friends out to dinner and writing it off on his business card as an expesnse - I'm more worried about millions of dollars lost in other places.

I wanna know why we need more government.

[g0bshiTe]

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".

Re:I wanna know why we need more government.

[jellomizer]

What do you expect the government to be responcible with the money they already have. Layoff thousands of useless unioned employee workers. Determinin the value where each dollar is going and determining if it is worth funding or not...

That is not how the government work, people will CRY oh why cant the government do this. Then they goverment will do this... Then a bit later they complain that the government didn't do it the way they wanted. in D&D terms the US Government is a lot like a wish spell with a tricky DM. You get your wish but it has a consequence that you didn't forsee.

Re:I wanna know why we need more government.

[plague3106]

Huh.. I remember R's always being tax hunger, unless you're talking about Big Business. R's were never the friends of ALL business, only big business.

What's the big deal?

[surmak]

According to the article, the IRS is only asking the banks to report the IDs of those receiving money from credit card transactions. Your purchases are not reported, only the aggregate of all the purchases of a business. This information will help to locate tax cheats. I would have a serious problem if the IRS got a list of where every consumer made a CC transaction, but that is not the case here.

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.

WTF? I already report my income from credit cards

[Anonymous Coward]

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.

Makes my head hurt

[pauljuno]

The Bush Administration is pushing for bigger government, great ... just great. He's a Republican too? I'm so confused.

Re:Makes my head hurt

[nurb432]

Why be confused? All politicians like bigger more complex government.

I don't get the problem

[cliffski]

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?

Re:Why are SSNs evil?

[sm62704]

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.

Re:Why are SSNs evil?

[TheRaven64]

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.