Power Sellers Unite

mongoose · Joined: 05 Feb 2008 Posts: 2087

We've discussed this in-depth before, here's confirmation and explanation of some of the reporting requirements.

Online Sellers Face New IRS Rules

By MARTIN VAUGHAN
July 30, 2008; Page D3

If you regularly sell items on online auction sites, you may find yourself on the Internal Revenue Service's radar. Recent legislation aims to help the IRS collect more taxes from online enterprises, many of which either don't know about their tax obligations or are ignoring them, according to the agency.

The provision, part of the housing rescue package that President George W. Bush is expected to sign within days, will require PayPal and other processors of online payments to report annual gross receipts to the IRS for all but the smallest online merchants.

Processors' Requirement

The new reporting requirement is similar to a proposal the Bush administration has put forward in its most recent budgets as a way to ensure that taxes owed are being collected. It also applies to intermediary banks that process card payments for restaurants and brick-and-mortar retailers. Congressional tax estimators predict the reporting change will help the IRS collect an additional $9.5 billion in taxes owed by online and traditional businesses over the next 10 years.

The payment processors will be required to file a 1099 form for each merchant to the IRS and to the merchant. They won't have to file for merchants with less than $10,000 in gross sales and less than 200 transactions in a given year.

And they won't start reporting until 2011, giving the banks and the merchants a couple years' head start to make sure everything is in order.

Business Transition

Confusion about taxes may be more prevalent among eBay sellers than brick-and-mortar firms because it is comparatively easy and cheap to set up an eBay business. The transition from casual seller to profit-seeking business can seem almost spontaneous.

Like many eBay sellers, Sarah Davis didn't set out to be a business owner. But somewhere between her first online sale and last quarter's $560,000 in sales of second-hand luxury handbags, it dawned on her that she had become one. From the time she started selling in 1999, Ms. Davis reported income from her eBay sales on a Schedule C. By 2005, her business had grown large enough that she sought tax advice. Soon after, she incorporated her business, Fashionphile, as an LLC.

Full Wall Street Journal Article:
http://online.wsj.com/article/SB121737220325394931.html?mod=rss_E-Commerce/Media

mongoose · Joined: 05 Feb 2008 Posts: 2087

Bush Signs Housing Bill
Associated Press
July 30, 2008 8:32 a.m.

WASHINGTON -- President George W. Bush on Wednesday signed a massive housing bill intended to provide mortgage relief for 400,000 struggling U.S. homeowners and to stabilize financial markets.

Mr. Bush signed the bill without any fanfare or signing ceremony, affixing his signature to the measure he once threatened to veto in the White House's Oval Office in the early morning hours. He was surrounded by top administration officials, including Treasury Secretary Henry Paulson and Housing Secretary Steve Preston.

Full Article:
http://online.wsj.com/article/SB121741699750696667.html?mod=fpa_whatsnews

jinxed · Joined: 01 May 2008 Posts: 15

"They won't have to file for merchants with less than $10,000 in gross sales and less than 200 transactions in a given year"

Um, I have a Hard Time getting this isn't ONE $1.00 considered profit if you buy and resell how come all of the suzzen $10,000..........I don't get it !

mongoose · Joined: 05 Feb 2008 Posts: 2087

$10K is the threshold level where the third party processor is required to send the account holder a physical 1099 Misc, and an electronic notification of same to the IRS.

By current tax law, if an individual derives $400 of income from self employment it must be reported on their tax return. Usually they are relying on the honesty of the taxpayer to voluntarily comply with this law as there are normally not any records establishing this level of income.

Currently, a 1099 Misc has to be issued to someone for $600 or more for contract labor, etc. The IRS receives copies of these along with electronic notification of payments less than than that when companies or individuals deduct payments from their taxes and indicate who they paid the money to to. They compare not only the issued 1099s, but also electronically verify amounts deducted by companies are being properly reported by the recipients.

In talking with some of the people I work with at the IRS they seemed to believe that it will only be a matter of time before third party processors will be required to electronically submit all aggregate amounts received per account. This will create barely any additional effort on behalf of the processors. A physical 1099 will only be required to be issued for the prescribed levels above. However, the IRS will have electronic records to compare to individual social security numbers to see if all known income is being reported.

cohibastore.com · Joined: 14 Sep 2006 Posts: 4764

"Congressional tax estimators predict the reporting change will help the IRS collect an additional $9.5 billion in taxes owed by online and traditional businesses over the next 10 years."

Over 10 years?

It will cost that much comply, and small businesses will get that bill too.

CS

mongoose · Joined: 05 Feb 2008 Posts: 2087

"...small businesses will get that bill too."

But of course! It's essentially another unfunded mandate which establishes yet another avenue to extract money from the private sector to fund the government's excessive largeness.

You expected maybe a fair and level playing field with self aggrandizing politicians involved....

mongoose · Joined: 05 Feb 2008 Posts: 2087

Deleted as double post by OP