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.htmlsnip~
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.