Posted on 03/09/2010 2:21:03 AM PST by The Magical Mischief Tour
Internet sellers who don't report their sales will no longer be under the radar. Starting next year, any bank or other payment settlement company that processes credit cards, debit cards, and electronic payments such as PayPal will have to issue information returns telling the IRS what merchants receive. The new returns are Form 1099-K, Merchant Card and Third-Party Payments.
Purpose of Reporting The IRS believes that many online sellers fail to report their transactions. Some don't report because they mistakenly believe that Internet sales are invisible. Others do so because they are trying to evade taxes.
The IRS has found that using information returns, such as W-2 forms for employees, Form 1099-MISC for independent contractors, and Form 1099-INT for bank interest, goes a long way toward improving the reporting of income. IRS computers can match income reported on these information returns with the income reported on tax returns.
Who's Subject to Reporting All merchants who accept payments through credit cards, debit cards, gift cards and PayPal will receive information returns telling them - and the IRS - the gross amount of the merchant card transactions. This will be broken down month by month. While the form uses the word "card," the IRS has made it clear that this is interpreted broadly to include third-party network transactions (i.e., PayPal).
Exception: Very small merchants won't be issued information returns. "Small" for this purpose means annual gross sales on merchant cards of no more than $20,000 or 200 or fewer transactions. In other words, reporting is required only if gross amounts for the year exceed $20,000 and there are more than 200 transactions.
Mechanics As it now stands (proposed regulations have not yet been finalized), gross amounts reported for merchant transactions do not take into account any adjustments for credits, cash equivalents, discount amounts, fees, chargebacks, refunded amounts, or any other amounts. It will be up to sellers to report on their returns the full amounts reported to them and then make adjustments or explanations to account for differences in what is ultimately taxable to them.
For example, a seller who is paid $1,000 by credit card for a particular transaction does not necessarily have $1,000 profit even though $1,000 will be included on Form 1099-K. The $1,000 must be reported so the return will match what's in the IRS computers, but this amount will then be reduced on the merchant's return by the cost of goods sold (what it costs for the inventory sold), merchant account fees, and other costs.
Providing Your Tax ID Number to Processors Merchants will have to provide their federal tax identification numbers to the companies processing their transactions. If they fail to do so, they may become subject to "backup withholding," which means these companies will have to deduct and withhold income tax from reportable payments. Backup withholding won't go into effect until 2012.
Sellers who don't wish to provide their social security number to payment processors can obtain an EIN (Employer ID Number). Note that you can obtain an EIN even if you are a sole proprietorship. See the IRS website for more information.
More information on Form 1099-K You can find more information about Form 1099-K, the new information return that payment settlement entities will use to report the gross amount of merchant card or third-party payments, on this IRS web page (PDF format).
So if someone cleans out their attic and sells it on ebay that is income? Somehow that doesn’t seem right.
Next things the RATS will propose is roving bands of taxmen invading yard sales and flea markets...
Open your wallet and take out all your cash. Look at each bill. Do you see your name on any of them? If not, you don’t own them.
Uncle Baraq wants them back.
If you buy something using PayPal, and for whatever reason you return it for a refund, and the refund comes to you via PayPal, guess what?
You have to convince the IRS that isn’t income. Good luck with that.
Its another form of property tax. You own the house, you still have to pay the government to allow you to live in it. It is all such crap.
But then this is the Peoples Republic of Maine
Let's try this again, Maine is doing this already, not sure
if all down do but Bangor checks yard sales and flea
markets all the time
This is however the Peoples Republic of Maine after all ...
Only if you sell more than $20,000 worth of attic stuff.
Bump
Bump!
The PRNJ tax gestapo has been working the flea markets for years. If you don’t have a tax number, they will add up everything on your table (using their idea of prices, not yours), and charge you the full sales tax rate on everything they see. In other words, you will be liable for the sales tax on stuff you haven’t sold, and might never sell. They will also be looking for contraband. If you inadvertently have just one restricted item on your table, your entire stock will be confiscated. They are looking for illegal weapons, drug paraphernalia, knock-off name brand merchandise, anything to do with endangered species, etc.
Bump.
Well if you have 20,000 dollars worth of stuff in your attic, then you’ll have to pay up.
Seriously though, this is not an extra tax, some big time sellers on eBay are tax evaders. Mr. average Joe has to pay income tax on 20,000 in income, yet a seller on eBay can make 20,000 and they’re not subject to income tax, unless they’re honest enough to report it. And believe me, there are many sellers on eBay making much more than 20,000 in profit. They’re dealing directly w/China, avoiding the middle man, undercutting US brick and mortars, and avoiding income tax.
“Well if you have 20,000 dollars worth of stuff in your attic, then you’ll have to pay up.”
Let me get this straight...I make $100k and pay income tax on
that. I buy $50k worth of junk and pay sales tax on that. Now,
you think I should pay tax on the $20k I might salvage out of my $50k worth of junk? Not in this life.
“Next things the RATS will propose is roving bands of taxmen invading yard sales and flea markets...”
Why not? They can team up w/the “consumer protection” commissars out looking for dangerous childrens books with lead paint-printed covers, deadly toys with swallow-hazardous knobs, and killer lawn darts...
Of course you could just claim you sold everything in your attic for a loss, after all I'm sure that old lava lamp you sold for $20 had to be worth at LEAST $100...
But seriously, $20,000 is pretty high, I did a lot of selling last year (around 100 transactions) and was under $10,000. Besides, If your selling more just create an account in your spouses name and your kids name and you can raise it by $20,000 a pop.
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