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In its report (PDF) last year, an influential IRS panel called the Information Reporting Program Advisory Committee also recommended that auction sites file 1099 forms. The panel said that "this change could permit further enforcement by the IRS."
"It's not trying to target or criticize the auction sites. It's merely trying to increase the reporting on these sales," said Paul Heller, the panel's chairman, who is also tax director for JP Morgan Chase's Treasury business. "And as these sales have become more and more popular...we need to now come into the 21st century and require some form of information reporting on those transactions. And that's what the government's real target is."
Currently, section 6405(c) of the Internal Revenue Code requires 1099 forms to be submitted by any person who, for a fee, "regularly acts as a middleman with respect to property or services." That definition clearly covers stock brokers, but according to tax experts it's not clear that it applies to eBay and its peers.
That's why the Treasury Department is asking for Congress to expand the tax code. "This proposal needs to be put in a piece of legislation and passed by both House and Senate and signed by the president to take effect," said a Treasury Department spokesperson who did not want to be quoted by name.
Heller, the IRS panel chairman, said in an interview this week: "Since eBay has all of the information, knows that a transaction has been consummated, knows who the seller is, and the seller is registered, then it would be appropriate for them to report the final transaction. They can track by taxpayer ID number how many transactions the seller does. Since they do have all that information, it would be appropriate for them to file a 1099."
While no formal legislation has been introduced yet, Heller said he expects to see it appear this fall.
An aide to the House Ways and Means Committee, which writes tax laws, told CNET News.com this week that there have been a few meetings, but members have not yet come up with a definition of who should be a broker or not. An aide to Sen. Max Baucus (D-Mont.), chairman of the Finance committee, said the panel was premature to speculate about what any legislation would look like.
Yet small-business advocates and pro-taxpayer groups are already preparing for a fight.
"The IRS coveted this kind of data for years and they didn't have a chance of forcing you to collect it from garages, from flea markets," said Steve DelBianco, vice president for public policy at the Association for Competitive Technology, which represents thousands of technology companies. "But they have a chance in the online world. They're getting the data because they can, not because it'll generate significant amounts of income."
Scott Weber, owner of GunrunnerAuctions.com, which sells about 400 firearms a month, said the additional paperwork would be a nightmare."I'm pretty much a one-horse operation here," Weber said. "I do everything myself. I'd have to hire a whole bunch of people. I'd have to hire someone full-time to do this. You'd need to track people all over the country, and you'd have to get their SSNs."
How much the tax gap can be narrowed by mandatory auction reporting remains a bit murky. Evidence suggests that taxpayers are far more likely to report income when the IRS receives 1099 forms. On the other hand, government auditors also have suggested (PDF) that a substantial amount of underreporting is due to "complex tax laws" or honest mistakes. In addition, a crackdown on online auctions could lead to a larger black market through garage sales, flea markets and, in the case of firearms, gun shows.
"This may be a bad sign that another front may be opening in the tax man's war on e-commerce," said Pete Sepp, vice president at the National Taxpayers Union.
See more CNET content tagged:
auction site,
tax,
Amazon.com Inc.,
income,
social security number
food... just so the gov can waist it...
I think i'll start digging up that cache of ammo in the back yard...
Let's imagine two frugal traveling salesmen. They each have to buy a new car every four years to (say) keep up appearances, and they need reliable transportation.
(One guy makes 20K, the other 300K)
Run the numbers on a the RATE of total income each pays on on 5% sales tax.
Poor Boy buys a $20,000 car pays $1000 or 5.0% of his income.
Rich Boy buys a $60,000 car pays $3000 or 1.0% of his income.
Also most CEO's money comes from investment income, how would that be taxed?
There should be only two types of tax:
(1) Income tax that does not let the top 5% who make most of the income in this country weasel out of paying tax. This will only happen when investment income (where most of the "idle rich" (yes there really are such people!) get there income) get taxed at the same rates as income from wages.
(2) Earmark tax:
Taxes earmarked to support only specific public expenses. Like gasoline tax for highway maintenance. Property taxes to maintain Fire and Police departments.
Sales tax is the darling of conservative politicians who don't care whether you can afford to pay the tax or not.
Me? If the threshold was $5K and I was selling more than that in a year, I'd have <YearlyIncome>/$5K accounts, each with unique, bogus information. I don't think I'd be the only one.
Oh well, least it doesn't apply to me.
Just another way for them to get their hand into my pocket!
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Different story for those making a profit.
responsible for spending, balance budget.
It is a shame that federal budget is run by people with no business
sense.
A person may sell a refurbished laptop on e-bay for $900, but it may cost $700 for the laptop, another $30 in listing/closing fees, and $20 to package and ship. The auction site cannot account for those things. So under this proposal they would tax on the sale not the actual profit (income). In the example above they would tax on $900, not on the actual profit of only $150.
What happened to the neocon "tax breaks"?
Here's your chance to create "smaller government", let Americans KEEP "their" money, and ditch this idea!
Get er Done!
Cowboy
Aside from this, an item's tax is based on what state it was sold in, and some states have no tax.
So this makes absolutely no sense whatsoever.
If I paid for an item and paid its tax based on what the state mandates, guess what? I don't owe anymore tax on it, my dear money-hungry government.
Junior got us into this deficit mess with his war over in the sand. He should've just left well enough alone. Now we've paid more than enough in terms of money and lives.
If my dear money-hungry government needs cash, look to Junior. Get HIS bank account number to withdraw funds from.
That goes without saying if you can - if he hasn't deleted it by accident along with all of a bunch of select emails... ^_^
The flat tax wouldn't work because that's what we had in '86 when Reagan got the tax code slimmed down. Look where that got us. Anytime you allow income to be the basis for a policy decision, class warfare is going to be a part of it. Eliminate the income tax and then everyone is treated fair.
See my response at http://blog.netchoice.org/2007/04/dont_make_an_on.html
- Not exactly.
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by jkarhu24
April 16, 2007 12:27 PM PDT
- Um... no. 51% of all government spending is on the military, past and present. The next big chunk goes to social security, and the final chunk to medicare. If anything, religious zealots supporting holy wars and geezers looking for a free ride should be cut. The rest of the government spending is almost negligible, but still incredibly large and important on an absolute scale (billions of dollars out of the trillions of dollar budget). Why should the poor be starving and living in poverty their entire lives, subjected to ****** public schools and either bare bones or non-existent medical care, and then left to feel the brunt of the tax burden supporting the riches political agenda? Fill me in on that one, please.
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- What?
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by Endbringer42
April 17, 2007 5:53 AM PDT
- The poor aren't paying taxes now, so how are they staying in poverty because of the federal tax burden? In reality the rest of us are paying THEM because they receive more services from the government than they pay into it.
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