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New Rules: You and the IRS this January

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snappyturtle Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-10-10 01:37 PM
Original message
New Rules: You and the IRS this January
In light of recent posts on DU and the fears around control of the internet and the government in general, I find the following to be another blow to the middle class especially small business owners. I have been completely unaware of this and that may be due to my present circumstances that allows me little time to keep on top of anything news worthy. This is a lengthy article but very explanatory with a 'solutions' section at the end of it. I have to post and run....but will check back later.



http://www.activistpost.com/2010/12/new-rules-you-and-irs-this-january.html

snip~
THE HOUSING AND ECONOMIC RECOVERY ACT OF 2008 (HR 3221)

Originally, the 2008 Housing Act required merchant banks and third party processors to report volume business sales of $600 or more to the IRS, but PayPal pressured Congress into raising the reporting threshold to 200 credit transactions and payments over $20,000 a year. Any business that uses a merchant bank account or third party network like PayPal with 200 credit transactions and sales of $20,000 or more needs to keep meticulous records because their financial data will be sent directly to the IRS. This begins January 2011.

This new provision will allow the IRS to supervise credit and debit payment streams that were formerly difficult to track. In the past, the IRS needed a subpoena from a judge to get information from merchant accounts. Now the IRS can spy on merchant accounts and audit without notice. Further, the IRS can guesstimate cash sales based on credit sales and compare those to similar businesses. If the IRS deems the cash sales as being too low, it could trigger an IRS inquiry or audit.

Because merchant banks and third party processors will send data directly to the IRS, they will have access to information not only on the sellers, but also the BUYERS! The volume aggregate sales will be sent directly to the IRS, but records of individual sales will be stored as back up data so the IRS may have access to individual buyer information.

Taxation is a function of government, but now banks and third party processors are part of the equation. Identity theft is a risk for self employed individuals and small businesses that use their Social Security numbers as Tax ID numbers with the new bank tracking system.

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dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-10-10 01:47 PM
Response to Original message
1. Theorheticaly, a "tax" issue, but certainly an ability to find out what we buy
and from who.
As I understand it, the gov. requires businesses to keep ALL indiv. transaction records for up to at least ...2 years?
in case of audit.
Which means they can know what books you buy, how much gold or ammo or......? you buy.
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Edweird Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-10-10 02:23 PM
Response to Original message
2. I've always been a big fan of cash transactions.
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Rosie1223 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-10-10 02:27 PM
Response to Original message
3. I am an IT manager for a retail chain
Let me clear a few things up.

The credit card processor does not know what you bought specifically. Ever. All they know is you charged $24.78 at the Safeway in Seattle. That is all the information the merchant sends them.

Retail chains store information by transaction (specifically what you bought) for several years already. We use it to determine patterns in purchasing and hopefully have the correct merchandise on hand when you come back and shop again. However, this information is also kept in case of an audit. If the State suspects we are not collecting sales tax properly, we have to prove that the items purchased were taxed (or not taxed) properly. Information on individuals is not sought though, the merchant is liable in these cases.

If a merchant sells guns, the sales information (including the purchaser's name etc.) must be kept forever. ATF requires it and always has.
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snappyturtle Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-11-10 08:51 AM
Response to Reply #3
4. Did you read the entire article? I had a gift shop for a few years
and before that a wholesale business. This article pointed out 'steps' that if I were a proprietor today would be different from what I had to report prior....it's more than keeping track of what I bought for my purposes.
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