Hidden Provisions Of The Housing Bailout Bill
August 3rd 2008 23:50
Did You know the IRS managed finally to get merchant reporting into the Housing Bailout Bill? Neither did I.
Here are the facts
Sounds simple enough. Just be sure what you receive agrees with the amount reported to the IRS so you don't get flagged for an audit.
Why is this provision in the bill? The IRS has persuaded Congress to include the provision with the idea that $100 Billion of online transactions is escaping taxation. If you operate a small business this makes it mandatory that you keep track of all your expenses or you will be facing a tax bite that could put you out of business.
Mark Nestmann thinks there's another reason for the electronic reporting:
You've been warned!
Here are the facts
Starting in 2011, the bank or other company that processes a merchant's debit and credit card transactions must send the Internal Revenue Service a form disclosing the dollar amount of payments the merchant received on those cards each year. The merchant would get a copy of the form, which would be similar to the 1099 forms companies use to report other payments to the IRS.
Sounds simple enough. Just be sure what you receive agrees with the amount reported to the IRS so you don't get flagged for an audit.
Why is this provision in the bill? The IRS has persuaded Congress to include the provision with the idea that $100 Billion of online transactions is escaping taxation. If you operate a small business this makes it mandatory that you keep track of all your expenses or you will be facing a tax bite that could put you out of business.
Mark Nestmann thinks there's another reason for the electronic reporting:
I could be wrong, but it seems to me that setting up an infrastructure that matches credit card transactions with payments to Internet merchants is tailor-made to help collect sales tax. And most Internet transactions still aren't subject to any form of sales tax. States will be chomping at the bit to get the IRS to share this data with them, so they can directly bill merchants for in-state sales. Any company that does business on the Internet, but that doesn't charge sales tax is at risk.
It's not necessarily simple to "know what you owe," either. In addition to the sales tax regimes in effect in nearly all 50 states, online merchants that collect sales tax must negotiate a maze of city, county, and municipal taxes. Plus, they must file sales tax returns in the jurisdictions in which they sell goods or provided services. Small merchants that can't justify investing thousands of dollars in software that can make the necessary calculations, and file the necessary returns, will be forced out of business.
It's not necessarily simple to "know what you owe," either. In addition to the sales tax regimes in effect in nearly all 50 states, online merchants that collect sales tax must negotiate a maze of city, county, and municipal taxes. Plus, they must file sales tax returns in the jurisdictions in which they sell goods or provided services. Small merchants that can't justify investing thousands of dollars in software that can make the necessary calculations, and file the necessary returns, will be forced out of business.
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