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The U.S. Treasury Department wants Congress to force auction sites like eBay, Amazon.com and uBid.com to turn over the identities and Social Security numbers of a large portion of their users to the IRS--so tax collectors know how much each person made through online selling.
The effort is part of a larger plan, which enjoys enthusiastic support from both Democrats and Republicans, to close what's known as the "tax gap." It's a broad term that covers Americans who don't file tax returns or those who underreport their income, and the IRS believes it to total around $345 billion for the 2001 tax year.
But the proposal is likely to encounter stiff opposition from Internet auction aficionados, free-market advocates and the auction Web sites themselves, not all of which are large enough to be able to comply with the rules without financial hardship.
"It's a total nightmare," said Matt Stinchcomb, vice president of marketing for Etsy.com, which allows people to sell handmade goods. "Our goal as a company is to allow people to make a living making things, and this is just another impediment to that."
Stinchcomb said Etsy would be uncomfortable asking its users to divulge their Social Security numbers, which are required on the IRS 1099 forms used to report untaxed income. "There are so few things now that are private and sacred," he said. "I feel like your SSN is one of them. Imagine, too, if every e-commerce site starts requiring this, the amount of times that data will be collected or falsely collected. There's a huge potential for fraud and identity theft."
But Washington politicians are looking around for any idea that will increase tax revenue without a formal vote to raise taxes.
At a recent hearing, Senate Budget Chairman Kent Conrad (D-N.D.) praised the idea of additional "reporting of money flows so the IRS has the ability to match up what was reported to what's actually happening." Another Senate hearing on the tax gap is scheduled for Wednesday.
IRS' history of targeting online auctions
The idea of forcing auction sites to invade their customers' privacy through IRS reporting isn't exactly new.
In July 2006, IRS official Nina Olson told Congress (PDF) that it should require "information reporting on gross proceeds from sales conducted on Internet auction sites." "One recent study found that 700,000 Americans reported that eBay sales constitute their primary or secondary source of income. The IRS must have the tools needed to address underreporting of this income," she said. Olson said the reporting requirement should begin when someone made more than $600 in a calendar year.
Olson renewed her request to Congress two more times, congressional records show, but it wasn't until the idea appeared in the Bush administration's proposed 2008 budget that Congress began to take it seriously.
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A Treasury Department analysis of the budget (PDF) says: "A broker would be required to make an information return showing its customer's name, address and Taxpayer Identification Number, as well as gross proceeds from the sale of tangible personal property." Unlike Olson's suggestion, though, it proposes the reporting requirement kick in when someone makes more than $5,000.
"The budget proposal has come out and people are looking for ways to close the gap, so they're looking at a lot of things, and I think we're just one idea that has come up," said Catherine England, a representative for eBay, which opposes singling out online auction sites to report on their sellers to the IRS. "What's happening is there's this assumption that people aren't reporting," she said. "There are a good number of people who are professional sellers on eBay. However, there's no evidence or any kind of statistic out there to indicate those folks aren't already accurately reporting to the IRS."
The company's own statistics suggest that there are 1.3 million people around the world who make their primary or secondary source of income through eBay, with just over 700,000 in the United States.
See more CNET content tagged:
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Amazon.com Inc.,
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Social Security
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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