Americans who sell items through Internet auction sites could be in for an unpleasant surprise at tax time next year, thanks to an IRS proposal designed to identify taxpayers who don’t report income from those sales.
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.”
Silly Stinchcomb, why would the US government care if people are able to make a living?!
The few items I have sold on eBay were things I was no longer using and they sold for much less than the original price. So, I would be able to claim a loss, right?
It disturbs me to see the government is considering forcing these web sites to hand over “identities and Social Security numbers” because, not using such sites myself, I was unaware they were legally allowed to collect Social Security Numbers attached to people’s names.
Considering the ID theft currently rampant and the critical importance of Social Security Numbers to stealing someone’s identity, shouldn’t the collection of SINs be limited to the government only – by law?
True, the government probably won’t secure them either but giving your SIN to anyone else seems to be unnecessarily risky behavior.
Is this common, giving your SIN along with your name and other information to stores? I can’t recall ever having done that. I keep my SIN private (the pun was sort of an accident).
Sigh! This is getting very tiresome. It’s Sunday morning and I reported two spam in the Forum, then I tried to post here, where there were zero entries. Instead, someone else got to publish their post but I got the following message:
“Sorry, but your comment has been flagged by the spam filter running on this blog: this might be an error, in which case all apologies. Your comment will be presented to the blog admin who will be able to restore it immediately.
You may want to contact the blog admin via e-mail to notify him.”
Here goes nothing…..
3. “Sigh! This is getting very tiresome…”
Sorry Fred. Spam has been a major problem lately and Spam Karma has been more of a hindrance than a help. I’ve personally been going through every comment and doing the best I can.
What I worry about is some state going after Amazons sells records. Of course we all claim those internet purchases on our state returns. 😉
So, are they going to go after garage/lawn sales and lemonade stands next?
Why shouldn’t someone be taxed on income from an auction site just as other businesses are taxed. Why should business generated on the net be exempt as if it’s some special tax free enclave? There needs to be a threshold of income generated for it to makes sense of course. It’s not about the occasional sale here and there, it’s about those that really are making a living at these sales and those that have “storefronts” on auction sites.
…gah!!!! FIX YOUR DANG SPAM FILTER!!! I’m either getting flagged as spam or as a duplicate entry.
7. “FIX YOUR DANG SPAM FILTER!!! I’m either getting flagged as spam or as a duplicate entry.”
Listen idiot. As I already said in 4, for the past week the spam filter has essentially been me. When I get a chance I go through the comments picking out the spam and recovering the valid comments. If you can’t wait a few minutes or so before your precious comment gets posted stop coming to this site.
[off topic]
#8, SN, if you’re using SK2, isn’t there an option to direct the spam to the old ‘captcha’ treatment? If so, wouldn’t that help you with the chore of filtering out the junk?
Just curious.
If you don’t have a Social Security Number, the IRS is unable to process your return. IOW no SS# no taxes. A SS# makes you a slave.
9. Good point, BubbaRay. If it were up to me I’d set it up so everyone gets the captcha, but after they get it, their IP address is free from it for an hour. But john sets that sort of stuff up. I’m just a peon.
#5 – Yes I do.
Are you saying you don’t, and feeling a little paranoid?
Pardon me for expressing some frustrations. I didn’t realize that doing so would get one labeled as an idiot. I read the notifications and saw no way “to contact the blog admin via e-mail to notify him” so I voiced my feelings at the end of my comment. I had no way of knowing if it would take a few minutes or a few days for my comment to go anywhere. We’re frustrated and you’re frustrated, but calling each other names doesn’t help either of us. Good luck with straightening things out.
4. SN,
You have my sincere appreciation for your reply. Now that I know what’s happening, I will lay off the complaints, try to be more patient and do my absolute best to subdue my own crankiness.
Keep up the good work and try not to be overcome by boredom on this beautiful (in my area, anyway) Sunday.
I’m with #2. If the feds want to crack down on this, they should do it without SIN. For the vast majority of auctioneers, like #1, the activity should have no federal income tax implications.
The possible good news might be the rise of offshore auction sites which won’t require users to submit Social Security numbers and thereby multiply the chance of their identity getting stolen.
And as #5 points out, the issue of state and local sales taxes is only going to grow in importance and stickiness. Sticky, as in getting a bigger stick.
It would be nice if regular, registered, known users of the blog could post without hassles. I fully understand the spam problem but there must be a way to have a list of safe allowed commenters. I see a large group of the same users on here all the time.
Increases in USPS postage rates have virtually killed ecommerce, sounds like taxes will be the last nail in the coffin for some sellers.
I hope sites like ebay and amazon send in their lobbyists to fight this.
Based on costs, ebay fees, paypal fees and postage handling one could just break even these days.
Whats interesting is how would a seller deduct the fees and expenses from their income? I make $15,000/yr. Are we talking about another 6 pages added onto my already bulging 12 page tax return?
I have mixed feelings about this thing.
I believe that the government has collected significantly less taxes since the internet became such a powerful sales conduit. You’re supposed to pay taxes on things you buy over the ‘net, but does anybody actually pay them?
So, cities and towns all across the U.S. have lost an important source of revenue: sales tax. We’re not talking a few cents of sales tax on small items. A LOT of the things purchased over the internet are high priced electronics. This is why schools in my town are closing, they isn’t enough government money to keep them open.
However, you rarely hear somebody saying, “YES, Sales Tax should be collected on anything sold over the internet.”
As others have pointed out, there will be a problem safeguarding the Social Security numbers. But just as worrisome will be the use of stolen or phony numbers. How could eBay verify that a specific number is being used by the correct person. Employers today have to wait weeks before having a SSN verified by the SSN Administration.
I understand the concept and have no problem with it. If you earn money you are obligated to report it as income. Currently many eBay sellers have made a living this way. Why shouldn’t they pay taxes on their wages as all us regular peons do.
Wasn’t the Internet a no Tax zone. When did that change?
Isn’t barter non-taxable? Just curious, there should be a tax lawyer around here somewhere.
[edit: the Feds figured out how to screw us on that one decades ago – generally speaking, taxable]
#21, Thanks, editor. I guessed someone here would know about it. If they can tax death, they can certainly tax everything else.
I think this is just a symptom of how broken the federal income tax law is. I can’t imagine the IRS would be able to accurately identify individuals who are not reporting income from eBay sales. $345 billion sounds really high to me. $345 million might be in the ball-park. The federal tax code is hopelessly complicated and inefficient. There is a whole industry dedicated to exploiting the complexity of the law to help rich people and corporations avoid paying taxes. I think it’s time to scrap the entire system and start over from scratch.