"IT'S ALL REAL ESTATE, SHOW ME THE PROOF."

I did. I not only quoted the passage in it's entirety, I gave you the url to read the proposed amendment for yourself. If you are unable to read and comprehend either of those you are destined to live in your arrogant ignorance.

Yes; as I stated in the previous post that you obviously didn't read, the bill in question is entitled as H.R. 3221 – Foreclosure Prevention Act of 2008 and it does deal with REAL ESTATE as you shout in capital letters. One of the proposed amendments to the proposed REAL ESTATE (I can SHOUT just like you) bill is a provision to provide funding for the legislation -- to pay for what it would cost to pass this legislation into law and follow it's intent.

This is not a proposal for sales taxes on internet sales that you keep referring to with your limited, myopic vision. It is establishing a mechanism, a form of verifiable reporting of revenue which is suspect to either non or under reporting and increasing income tax revenues from such income derived revenue. It is a mechanism to provide the IRS with an aggregate, a cumulative, total of revenue passed to an individual through third party processors; i.e., Merchant Accounts, PayPal, etc. I've given an example of how it would most feasibly work with my explanation of 1099Bs.

At some to be determined reporting threshold (either dollar amount or payment frequency, or combination thereof) the IRS would compare an individual's actual income tax return reflecting revenue derived via third party processors with reports submitted by the third party processors to ascertain whether or not all revenue is accounted for on the return. From the reported aggregated revenue a taxpayer would subtract costs of doing business to arrive at a net gain (or loss) from such revenue. Income tax, and possibly self employment tax, would need to be paid on any net income realized.

It's obvious Congress believes (and probably rightly so) that there is a substantial volume of business income, ranging from the hobbyists to full time, full blown enterprises who are either not reporting, or at least under reporting taxable income derived from such transactions. This amendment to H.R. 3221 – Foreclosure Prevention Act of 2008, a REAL ESTATE bill, would accomplish two things; 1) it would provide a means for accurately tracking a large portion of revenue generated "off the current radar" and insure tax compliance with income derived from such revenue; and, 2) by identifying and taxing such transient income, they would raise additional government income tax collection - without any new tax laws, just reporting accountability - to pay for the expense of funding the foreclosure prevention measures of the REAL ESTATE bill.

Of course, if someone is already in compliance with the tax laws by reporting any net income realized through sales, regardless of payment method, all this will do is add another form to be completed on your tax return. Conversely, if someone is not reporting net income derived, they would have to start such compliance IF this amendment to the REAL ESTATE bill is passed along with the bill and is signed into law.

As a side note to answer another of your challenges, Ocean, a credit or debit card is a card used to complete a transaction by legal payment. They are specifically covered by the provided description of a payment card; eg: "A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions."

mongoose wrote (View Post): › "I hate to tell you "Mongoose" but you were mislead..." "...The passage Lurkeylou pasted "IS" from the morgage crisis going on in the country right now due to the Countrywide scandal and has nothing to do with taxing sales" Wrong on both counts, Ocean. Not to burst your bubble, but part of the uproar is that the Senator (Dodd) inserted the provision as an amendment to it after the House legislation. In case you are unaware of it, this is a typical way to sneak unfavorable legislation though; by attaching it to unrelated but important legislation that will most likely be approved. While the primary intent of the bill is housing and Foreclosure relief, it carries a "poisonous pill" pertaining to all third party transaction processors (not just internet) rider as an amendment. So if the Housing bill is passed, so does this section. So in the future, when reviewing proposed legislation, be sure to check all documents and submissions pertinent to such legislation before providing your admonishments to others (in this case, approximately 646 pages - a "surprise" can be located anywhere in the legalese). The amendment submitted to attach to this bill, appropriately entitled by section as Payment Card and Third Party Network Information Reporting is, to wit: No. 62 June 18, 2008 House Amendments to the Senate Amendment to H.R. 3221 – Foreclosure Prevention Act of 2008 On May 13, 2008, the Senate received from the House 3 amendments to the Senate amendment to H.R. 3221. Noteworthy: Other Provisions (pages 11 & 12 of aforementioned amendment submittal) Revenue Provisions Payment Card and Third Party Network Information Reporting. The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011. This proposal is estimated to raise $9.802 billion over ten years. (emphasis added) To help you in your research, here's the url to the government documentation. (again, pertinent paragraph on pages 11 & 12) http://rpc.senate.gov/public/_files/L62HR3221Houseamendments0618SN.pdf Please note that while this is not a proposed internet tax or tax system, it will effect all transactions where a third party processor is involved, whether it be at your local gas station or a transaction consummated over the internet. Except for the two exceptions noted for some processors, all transactions will be aggregated and reported. They are looking for ways to fund this legislation. Aggregate reporting of third party processors for revenue produced will insure such revenue is being accounted for on tax returns, and the appropriate income tax from profits derived from such transactions are being effectively being realized. It's not an "internet sales tax." Most importantly, please remember that this is proposed legislation not voted on and passed, nor signed into law at this time. It's PROPOSED.

I understand everything you are saying and everything in the proposal cyrstal clear about the third party transactions.

I know the state of New York is after tax money from Amazon. Amazon is basically retail. I beleive one day it will happen and internet business will be taxed.

Even what you keep saying doesn't make me believe this is going to happen except in real estate. The proposal is written up to cover Payment settlement entities meaning settlement organizations such as Paypal and Google checkout, banks, lending organizations, credit card companies (people with very high credit limits).

Paypal and Google just may have to start reporting transactions above 10,000 and more than 200 transctions above this amount. But people still make personal transactions on these third party payment sites and reporting them to the IRS would invade peoples privacy and kill Paypal. I don't hear anyone screaming yet!

*Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions.*

Even if this can spill over to the internet it would put Paypal and Google into harms way and I don't hear Ebay screaming about it. Most of the sellers would go to a cash only basis (personal checks and money orders) and those types of payments being sent to the IRS would be an invasion of peoples privacy and start the biggest uproar. Lots of congressmen would be looking for a new line of work.

This whole thing you are stating that's going to happen to internet sellers just doesn't seem like a well thought out plan by the government or any senator to collect taxes from the Hobby people or anyone else when they can go to a cash only payment plan.

I will take this whole thing as only for real estate transactions until I hear about it on the news, lots of sellers start screaming, Ebay goes nuts, I get some direct info from the Senate or House web sites.

They slipped it into the bill... what don't you understand? Politicians do it all the time, and it is not acceptable. It's a shady tactic and I don't respect any politician who engages in it. Personally I think it's time for a little Anarchy!

But, it's good news for Sellers engaging in the resale of personal items. If I go to a garage sale and buy a used trinket, then bring it home and list it at an auction site, how in the world is the IRS to know where I purchased the item, or how much I paid for it? They won't and this seems fine with them. They're after the corporations who have been getting away with not paying taxes on Internet sales for years.

This is why ebay is transitioning and also why Meg the Mole has inserted herself into politics. Ebay always tries to stay a step ahead of the competition. But, the way it's looking ebay may have misinterpreted this whole tax thing. They're ditching the Sellers who won't be affected by it... or do I have it all wrong?

"If I go to a garage sale and buy a used trinket, then bring it home and list it at an auction site, how in the world is the IRS to know where I purchased the item."

If you are payed for it by cash, money order or check, it will fly under the radar of this bill's intent. If you sell that used trinket and accept PayPal (or a similar third party processor via electronic payment) the dollar amount would be included in the aggregate (or total amount) credited to you -- most likely by way of your account number to your social security number.

Example:
a)Cuff buys a trinket for $5.00 at a garage sale for cash -- no record of seller receiving payment to be reported.

b) Cuff sells the trinket via online sale to Ocean for $30.00 and accepts Paypal as payment for the trinket.

c) Paypal's computer registers a $30.00 credit received to Cuff's account.

At the end of the year, PayPal's computer will spit out a statement showing $30.00 received via electronic payment by Cuff.

That statement, in the form of a 1099 (designation to be determined, i.e., Misc) will be sent to Cuff and electronically to the IRS.

On a designated form, or line on a form, of her tax return (most likely Schedule C, Self Employment), Cuff would show receipt of the $30.00 from PayPal. She would then deduct actual expenses from that $30.00, such as: $5.00 purchase price, $4.50 postage to mail it, $14.50 in eBay/PayPal fees.

The $5.00 profit would be taxable income subject to both regular income tax and self employment tax. Of course, in other sections of her tax return she would be claiming a deduction for mileage (used to attend the garage sale to secure her inventory), deduction for using part of her house for her business, and any other expenses incurred in operating her business - further reducing her taxable net income from her business.

For documentation of her inventory cost of used items the IRS would most likely require a ledger entry identifying the trinket and where purchased and the amount -- this is similar to the ledger or log that they expect people to keep in order to document mileage and/or expenses of using a vehicle for work.

If Cuff was buying the trinket new for resale, she would have an invoice from her supplier to use in place of the log entry.

Also, if Cuff only accepted a check or money order from Ocean, there would be no 1099 generated reflecting that she received money for her trinket.

This is an oversimplified example just following the proposed audit enabled transaction record that this bill would create. In real time application, if Cuff made 500 such electronically identifiable sales in a year she would get a 1099/s reflecting the total received by her SS# for the year. If she used more than one third party processor -- PayPal, RME, Google, etc. -- she would receive a 1099 from each processor reflecting the amount collected on her behalf by that processor, all of which would be expected to be listed on her tax return.

It's not causing a blizzard of paper work for the IRS because such accountability requirements are transmitted to them electronically, computer to computer.

Ocean said he hasn't heard of this in public news as of yet. That's understandable as such legislative shenanigans are usually kept as hush hush as possible, attempting to pass them under "cloak of darkness (like pork barrel expenditures) to avoid public criticism. It was "justifiably" slipped into this REAL ESTATE bill for two reasons: 1) the bill will most likely pass as the public is outraged over the high foreclosure rate in this country; and 2) they are using this mechanism to provide more tax revenue collections in order to pay for the expenditures required in the bill for foreclosure prevention -- in other words they're saying, "here's what it'll cost to stop or slow down rampant foreclosures, and here's how we need to raise the money to pay for it." The major media is focusing on the public benefit of the foreclosure prevention bill and somewhat ignoring the source of funding the costs.

The IRS has been calling attention to the potentially large, "invisible" and therefore, untaxed income being generated via the internet and under reporting by businesses for years. This is a step to bring some of those revenues to light to insure compliance with the "voluntary" income tax laws.

However, rest assured the third party processors are are already putting their PR and lobbyists behind efforts to kill it. They are looking a very expensive programming to implement such a program; are being told to take on a gigantic responsibility, cost and liability to accurately report such transactions; and, are afraid of something Ocean pointed out, they'll lose business to people changing even more to cash or check.

At least one of the major third party processors, First Third Bank, has already testified before the House Small Business Committee (June 12, 2008 - "The Problems and Challenges of Electronic Payments Reporting for Small Business") against this proposed bill. I'm sure that other processors have put in their opposition to this, and many more will follow suit. Even if they don't testify against the bill, you can rest assured that they have some high priced suits lobbying hard against it. The wheel is being greased -- successfully or not only time will tell.

Link to read Testimony of Donald Boeding, Senior Vice President and General Manager of Merchant Services Fifth Third Processing Solutions before the House Committee:
http://www.house.gov/smbiz/hearings/hearing-06-12-08-electronicpay/Boeding.pdf

Don't you have to earn more than $600 before having to pay taxes on it? If that amount is not realized, would a 1099 still be generated? Or, would it come to you when you've exceeded that set amount?

"Don't you have to earn more than $600 before having to pay taxes on it? If that amount is not realized, would a 1099 still be generated?"

Some of this is yet to be determined. However, if we apply current rules of self employment to this proposal, you are "required" to report earnings in excess of $400 realized by your endeavors. This is to be reported on Schedule C, Self Employment. The tax regs require that you report these earning whether or not a 1099 Misc was provided -- lack of 1099 Misc is not an excuse for not filing.

The $600 threshold you address is the level in which someone paying you is required to file a 1099 Misc. Although the law states that anything under that need not be filed via 1099 Misc, many companies file them anyway (conversely, many companies do not send out 1099s even at levels exceeding $600 unless there is federal or state withholding involved, then it's mandatory subject to fines). However, in both cases you can rest assured that the companies are deducting such payments from their taxes as business expenses and showing who the payment was made to by either inclusion of the recipient's SS# or Tax ID# -- a verifiable cross index for the IRS to use in evaluating the tax return of the recipient.

Since third party processors would have no readily available knowledge of how many processors an individual was using, they will probably be generating reports for any threshold amount (hypothetical example, $50.00 per ID#) set forth by the IRS. In that way the IRS would have a cumulative total of revenue processed by all third party processors the ID# dealt with.

Again using the current reporting laws for self employment, if an individual had 10 different reports of $50.00 each submitted from 10 processors, the aggregate amount would exceed the $400.00 threshold, thus requiring a Schedule C to be filed with the tax return.

Thanks for explaining everything so well Mongoose!

You are most welcome! I hope everyone reading this is able to understand what is proposed.

And, I hope everyone keeps in mind that this is just a proposal and the examples provided are simple hypotheticals, speculation on how it might work based on how current tax regs function.

The third party processors are vehemently against this proposal becoming a reality. As the testimony cited above explains, this would be a very expensive, hard to implement and controversial regulation. They don't want it anymore than individuals want it.

But, there is a definite lack of voluntary compliance, even carefully crafted evasion of the tax laws in the area of electronic payments whether they be internet businesses or not. The more the government spends, the more "voluntary compliance" and collected revenue they need.

Some version of this will be passed sooner or later.

OK, I read the link you pasted and it's starting to steer me to believe Paypal maybe going to lose some big time money if people start going over to a cash basis. Keep pasting the links you find.

It still doesn't sound like the proposal is after the small internet sellers. Sounds like they are after the big movers and shakers plus retailers not reporting sales made over the internet concerning high end transactions.

The small MOM and POP sellers still may get caught up in its web and suffer. I know if this happens my income from internet sales will go in a downward spin for awhile but I think I would recover OK after buyers got the message they can't use Paypal anymore because no sellers use this online payment system anymore.

Back when I studied taxes it was $50.00 a month and you had to report it. Haven't kept up on the tax laws for 30 years. If it's $400.00 now I guess internet mom and pop sellers should be happy about that. I'll be hard to get receipts to prove how much you paid for an item.

We'll see, I'll spend a little time looking for more info. Keep pasting links for us to read.

"...they are after the big movers and shakers plus retailers..."

I agree that is the primary target of this proposal. However, as you pointed out many Mom and Pop operations are going to get caught in the net via the generation of revenue reports once they meet or exceed some as of yet determined financial or volume threshold -- if the proposal passes.

It's not extra effort for the IRS computers to index such reports by ID# and compare the income tax return for that ID# to verify that all revenues are accounted for. If the return is deficient, a computerized letter of inquiry would be generated and sent to the taxpayer asking why some missing reported revenue was not included on the return originally submitted. Depending on the answer, further action could be initiated by the IRS over the next couple of years.

If the taxpayer was deficient in their initial filing they would be required to not only pay the additional taxes (income and self employment), but penalties and interest as well. If they snared a couple of million+ Mom and Pop operations not paying taxes on income realized from operating their business (anything above $400.00 per tax year as it currently stands), the amount of revenue raised by the government would be substantial. Overall, they project $9.8 billion will be generated by this; with a median effective federal tax rate (income + SS, Medicare, etc) of 17.4%, they are claiming untaxed income generated of between $85 - $100 billion dollars a year -- they want/need that money to fund projects.

I wouldn't bet on being too small for the IRS computers to spot unless I was truly someone cleaning out the accumulated "stuff" around the house, or just did a couple of hundred in business with electronic payments per year. The IRS would probably accept the answer that someone was just selling old personally used items a couple of years -- but after a few years they might want a little more proof that this was truly the case.

I'm still in a state of disbelieve about this even though I knew one day it was coming.

I'm still looking for more news. I did come across a passage that stated an amendment introduced by Dodd was not read on the senate floor and accepted as such. Can't find anything about it in the Senate floor activity.

Here's some people talking about it with more specify language and more specify information. I guess I'm a "Full Believer" now even though I still "Can't beleive it" and knew it was coming some day. Guess I had better get on the bandwagon and change direction now.

Lots of congress people going to lose their jobs if it passes.


******If this Bill passes, BofA’s Countrywide buyout is much more palatable and the $60+ billion in toxic loans are mostly covered by the taxpayers. This stinks to high-heaven. its no wonder why BofA is so comfortable closing the CFC deal, which with will cost them at least $40 billion when considering the value of theie toxic assets (loans) vs massive debt. I actually did a post on it, if you are so inclined.

Even more disturbing, in the BofA draft it proposes than Ginnie Mae gives an explicit guaranty on the loans. I wonder if you read the fine print of the Dodd-Shelby Bill if it is in there somewhere but has just has not been publicized?

This just in, found by a TickerForum memeber… www.FreedomWorks.org says that “Senate Housing Bill Requires eBay, Amazon, Google, and all Credit Card companies to Report Transactions to the Government”.

“Washington, DC - Hidden deep in Senator Christopher Dodd’s 630-page Senate housing legislation is a sweeping provision that affects the privacy and operation of nearly all of America’s small businesses. The provision, which was added by the bill’s managers without debate this week, would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.

FreedomWorks Chairman Dick Armey commented: “This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay’s PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America’s small businesses are breathtaking.” ********

-This is a statement someone else wrote-

It is absolutely obvious that Bank of America and Countrywide WROTE the legislation exactly as they wanted it!!

DODD is so clearly OWNED by both Countrywide and BofA, and it makes me sick what he is doing to the Democratic party!!

This bill limits the banks losses to 10%. Guess who gets the bill for the rest??!!

OUTRAGE?? Where is the OUTRAGE?!!

"...www.FreedomWorks.org says that “Senate Housing Bill Requires eBay, Amazon, Google, and all Credit Card companies to Report Transactions to the Government”.

This was what the original post by LurkeyLou covered, including a longer quotation from Freedom Works which you partially duplicated. Perhaps if you had read past the words REAL ESTATE in the original post you could have saved yourself a lot of time spent in denying it and spent more time doing new research on the topic.

And you are absolutely right in it being a big business bailout masqueraded as a public protection measure. Who always pays for bailing out big business for taking on and failing of high risk ventures -- mom and pop America.

Since we're talking about our friends at the IRS, I received this bulletin from the dears today:

IRS Increases Mileage Rates through Dec. 31, 2008

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight [8] cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by eight [8] cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2008-63 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.