Selling stuff online? Here comes the IRS

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Clarification of proposal

>However, if the IRS is going to base your income tax strictly on your totals Ebay supplies them, then its already a farce.

The IRS is well aware of the difference between gross receipts and net income. Based on the way the IRS has used 1099-MISC reporting in the past, they will try to match 1099-MISC income with the "gross receipts" reported by the taxpayer on forms Schedule C. If the taxpayer reports less gross receipts than shown on the 1099, the IRS will request an explanation. If the taxpayer reports more, they will assume he/she/they have other gross business income that was not reported on the forms 1099.

Unfortunately, we have an income tax in the U.S. I don't like it, but as long as we have one, I believe everyone should follow the law and report their taxable income and take all possible (legal) deductions --- or help repeal the 16th Amendment.

The only real problem I see with the proposed reporting requirements is that it puts the burden on (e.g.) ebay, which they will have to reflect in higher costs, which will reduce seller revenues (and ironically taxable income). Furthermore, if (e.g.) eBay reports income incorrectly (as many, many, employers and other organizations do every day), this creates a problem for the taxpayer, as the IRS always assume the W-2 and 1099 data are correct, and the taxpayer's return is in error. This results in much wasted (taxpayer and government employee) time, as well as inevitable over taxation (when the naive taxpayer also assumes the incorrect data on the W-2 or 1099 to be correct).

I'm also skeptical when the IRS claims there is 374 billion in undeclared income. Where do they get these figures? If they actually have data indicating the extent of undeclared income, they should also have data indicating who is not declaring it. If so, they already have the resources to go after these tax evaders. So this proposal isn't about increasing compliance, but rather increasing compliance with the least amount of effort (and expense) on the part of the IRS. It's comparable to Benevlent Big Brother encouraging children to report their parents "crimes", so the police don't need to expend the resources to do so themselves.

America, land of the free? Not since the 16th Amendment was passed.

Posted by: cdgoldin   Posted on: 04/16/07 You are currently: a Guest | Members login | Terms of Use

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