IRS Wants a Cut of Sales On eBay and Craigslist

Ponca City, We love you writes "In 2009, $60 billion worth of items were sold on eBay, meaning 'extra' money for many sellers, whose activities may provide them with taxable income. Now the Washington Post reports that beginning next year, a new law will require 'the gross amount of payment card and third-party network transactions to be reported annually to participating merchants and the IRS.' Also, for 2011 tax returns, 'taxpayers who annually sell more than $20,000 worth of goods and have more than 200 electronic transactions' will receive a new IRS form, known as 1099-K, for reporting the proceeds. The new tax issues shouldn't be a concern for people who sell just a few small items online for less than they paid for them, because as the IRS points out, income from auctions that resemble a garage or yard sale 'generally' isn't required to be reported. But if an online garage sale turns into a business with recurring sales and purchases of items for resale, it may be considered an online auction business. 'Generally, transactions resulting in a gain are reportable, regardless of whether the taxpayer is conducting a business,' says Gil Charney, principal tax researcher at The Tax Institute at H&R Block. The real reason behind the law is simple: Research shows taxpayers do a much better job of reporting taxable income when they know the IRS is receiving information about their transactions."

Comments

Well for starters

[goombah99]

it means that they will have to collect your Taxpayer ID number and then validate it.

so no illegal alliens can use E-bay.

Since they will be reporting SSNs to the IRS it will also be interesting if the law enforcement agencies sniff this for fugitives. Supposedly SSNs are not supposed to get used for law enforcement but they are.

I wonder how they will deal with people who claim not to be US citizens.

Re:Well for starters

[blantonl]

's also worth noting that the IRS is prohibited by law from sharing information with other government departments,

Really? That is interesting... because the FBI needed to get ahold of me about an issue with my business, and they contacted my [b]accountant[/b] first.... presumably through my corporate tax returns. Why/how else would they have contacted my accountant?

Re:Well for starters

[peragrin]

I suggest you read the history of Al capone. He was never tried for killing anyone. Instead he went to jail for not paying taxes on his speakeasies, and illegal liqueur sales.

I don't know why people fail to understand history the implications it has across time. I am personally waiting for the IRS to start cracking down on drug dealers. there are billions in taxes that are waiting to be collected.

Re:Well for starters

[kcitren]

And this tax is tracked how online? On ebay, for example, is ebay required to collect this tax? or the seller? or does the buyer just record all their purchases and pay up at the end of the year? I'm all for a national sales tax, but it still requires tracking of individuals.

Re:Well for starters

[causality]

And this tax is tracked how online? On ebay, for example, is ebay required to collect this tax? or the seller? or does the buyer just record all their purchases and pay up at the end of the year? I'm all for a national sales tax, but it still requires tracking of individuals.

No, it requires tracking of businesses and merchants. Ever buy groceries at (say) a Wal-Mart and then have to file a form with the state for the salex taxes you paid? No? Do you know why? Because that is a matter between Wal-Mart and the state in which that particular store is located. Wal-Mart has to pay sales taxes on its sales volume whether or not they pass them on to you. To keep things simple they pass them onto you on a per-transaction basis. That's why your receipt has line-items detailing your subtotal, the sales tax, and your final total which is the sum of both.

The Fair Tax is designed to be revenue-neutral. That is, the federal government would collect the same amount of taxes under the national sales tax as it does now under the income tax. That means that unlike most state sales taxes, services are taxable because companies that sell no goods but make money from providing services currently pay income taxes. Thus, eBay would pay its own sales tax because providing the storefront and maintaining the Web site is a service and the merchants are its customers.

As a business or a merchant, it would cost less to comply with this simplified tax code than it does to comply with the enormousely complex income tax system we have today. That's partly because it only applies at the retail level; factories and wholesalers and such would not be paying it. Most importantly, it would represent the single largest transfer of power away from politicians and to the people that has ever occurred during my lifetime.

No offense is intended, but to be completely honest with you, your question is uninformed and trivially answered with a Google search. The Fair Tax bill is the most thoroughly researched piece of legislation in the history of the USA and such questions have been exhaustively answered. Really the only reason it has not already become law is not because there are credible objections to it, not because it would do harm, but because politicians do not wish to give up the tremendous and subtle power that the income tax code represents.

Re:Well for starters

[AK Marc]

The Fair Tax bill is the most thoroughly researched piece of legislation in the history of the USA and such questions have been exhaustively answered.

I'm glad I put the milk down, or it would be going through my nose right now. What's the economic impact of setting the pay-back line at poverty (as done now) vs twice poverty (and, of course, having a higher tax level to compensate)? It's never been researched at all. Back when no one heard of Fair Tax, I thought it great, and I asked the question, "why exactly poverty level?" and the answer back was something to the effect of "Because that's the lowest we can get it and the point is to sneak in something as regressive as possible while claiming it to be progressive." It is an arbitrary line drawn in the sand without *any* research at all.

If you disagree, please point me to some research done about how it would affect the US economy if that level was set at half-poverty, poverty, and twice-poverty. Go ahead, I'll wait.

And you are more civil than most with your "It's perfect, don't question The Fair Tax" stance. But usually, when I ask questions, they are even more self-righteous than that.

But mention that spending is more volatile than, say, income for boom bust periods and asking about what will be done to improve the stability of income, and they'll look at you like they never took econ 101. And these are the people claiming "the most thoroughly researched piece of legislation in the history of the USA" and miss simple things like spending being more variable than income. Really? Or correct me, where's the actual study on the effect of spending levels in varying economic times. After all, this completely unresearched piece of crap was so researched, you'd be able to prove me wrong easily. Instead, it's a good idea that was perverted early on by conservative people with the specific goal of getting the top income level as small as possible and convincing everyone else it was "fair."

When they have to name something with adjectives, you are safe in assuming the opposite, until they prove otherwise, and they haven't.

If you don't believe me, look at the utter shit being presented about it. http://en.wikipedia.org/wiki/File:FairTax_married.png Apparently, this "revenue neutral" legislation will reduce the taxes on everyone. Either someone's taxes have to go up, or it can't be revenue neutral. So the graph, done by "a Boston University study" (really some guy's thesis, and I've done one of those, I know what crap they can be) is presented like fact, and is demonstrably flawed. That's the level of research this gets. "It'll lower taxes for everyone, and is revenue general too" and no one notices those are contradictions... With research like that, who needs facts?

Re:it's worse than that

[ducomputergeek]

Problem is what constitutes a "business". For instance, i've inherited most of the family farms totally about 500 acres. I rent the farms to a farmer, but I still have to spend a few weeks a year down there to do maintenance on the bins, building, tractors, bush hog, spraying, etc.. I'm not sure how familiar you are with farm equipment, but if anything breaks, chances are it's going to cost more than $600 in parts & labor to fix.

Right now taxes are pretty easy. It's the checks that come in when we sell the grain against the expenses that go out for Diesel fuel, my share of the fertilizer. I keep a separate bank account for the farms to make things a bit easier. But now having to spent the time to send the fertilizer folks a 1099, the gas station (I buy diesel 20 gallons at a time) a 1099, the local mechanic a 1099, the kobota dealer a 1099, Rural Kinga 1099, and damn that gets to be a lot of work on top of keeping track of everything for my day job (software company I own).

At the software company, I expect having to keep track of everything as part of the cost of doing business. The farms are something that are just there and I would like to keep the farms. They've been in the family for 4 generations and provide a nice annual bonus for the amount of time I do put into it. But time is getting to be a problem for me and it really begs the question is it time to put the farms up for sale.