Posted on 03/14/2010 3:59:46 PM PDT by jsh3180
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).
My EBAY account!
This month will be my last on EBAY and Pay Pal!
I tried several others and they were all pretty much useless.
Thanks for the ping!
btt
Bet on it.
I am trying Upillar.com but no bites yet. It has been a while since I have looked at the specifics regarding feedback and other stuff.
Why are you so sure that the IRS will not continue to exist???
They dont want to cut fraud and spending, they want to destroy free enterprise.
Everything is just how Congress wants it in this nation. EVERYTHING. They have their grubby, greedy, sadistic, bitter fingers in everything. Nothing happens without their OK. The IRS is what they decide it is. China is no longer buying our bonds. We can’t fund our govt spending without massive deficits. They “need” every cent they can find.
“Sellers will start only taking money orders.”
Ebay doesn’t allow it. I hear Amazon did or will be following suit.
Cash will make a comeback
I disagree with most of the comments here...
If your running a business and making a profit you need to pay your taxes. Them sending you a 1099K doesn’t mean you owe that much tax. Indeed, you may not owe any if no profit is involved in the sale. However as much as I dislike income tax, if were going to have it then everybody needs to pay.
No here is a novel idea:
Since the Federal Government derives its power (constitutionally) from the states, taxes should be on the states based on its population derived from the decentenial census. This approach would do severl things: 1) limit the power grab by the feds, 2) fix the revenue stream for a period of ten years (which would help budget forcasting, and 3) limit the power of the federal government. Of course the basis for this to happen is elimination of the Internal Revenue Code.
The States need to take control of these United States.
eBAY owns PayPal....and that's the MAIN payment method they accept. No M.O's, no personal checks.
What are you wanting to sell?
They have already changed it to insist that you use Paypal. This is my last year on ebay. It used to be fun, but it has become more restrictive, and not seller friendly. Buyers can blackmail you with bad feedback if they get buyers remorse or bid more in the heat of the auction then they should have; sellers cannot leave reciprocal feedback, they have to open a case with ebay and ebay tends to find for the buyer. I’m done.
We are past the point, IMO where you could never know when you might be breaking a law. Thus they can "haul you in, round you up, tax you, tag you, levy you, charge you, surcharge you" to death!!!
All the while we hear tell that our "great leaders" lie cheat and steal...and it doesn't seem they are held accountable. Not to mention they are running the country into the ground??
It has gone to hell. Since they changed the policy so that a seller cannot leave bad feedback on a buyer, I have had buyers actually use it to get a partial refund and keep the item by claiming its got a problem they were not made aware of, no matter how many close up pictures I post. Even saying its “in rough shape” is not good enough. I sell used books, chachkies, from the 50’s, stuff like that, nothing new. Ever since this new rule, I am suddenly getting buyers, who, no matter how descriptive I am of the item, say they are disappointed but they want to keep it and get a “partial refund” from my Paypal or will leave bad feedback. I have 100% positive feedback and this had never happened before in my 6 years selling on ebay. It is not a coincidence; ebay’s buyer bias has created a new crop of scammers. I’m done.
The IRS is “too big to fail”. I don’t believe that I will ever see a flat tax, or a more fair and simple tax system. Too much power is already in the hands of too few.
Heck, I’ve been hearing about a balanced federal budget for nearly my entire life (40 years) and that has never happened either.
I’ve gotten to the point at which I am glad I am in my 50s. I would not want to be a young person and have to deal with what is coming down the pike during the next several decades. For the first time, I am sorry I had kids and that they will have to be adults in a country that has our federal government.
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