Electronic Transaction Reporting
Ars Technica reports that a pending bill in Congress would require electronic payment processors to report information to the Feds on any customer that has more than $10,000 in payments transferred. People are reacting to this like its something new, but it is very similar to the long-established financial reporting requirements of your local bank.
Disparaged as a “privacy” issue, this is really a tax collection issue. It is thought that many of the owners of small businesses charged with self-reporting income, as I do for my little web hosting business, aren’t reporting because Paypal, Googlecheckout, and eBay are flying “under the radar” of the IRS. Already, web income from Google ads, Amazon.com affiliate stores, etc. are reported to the IRS, and I report every cent of income for my “hobby based business” (income counts, but expenses and deductions only count as much as they offset that income; I do not take losses to offset my “regular job” income).
This new provision just adds other payment processors to the mix. The Treasury expects to collect an additional 9.8 billion dollars in heretofore uncollected tax revenues.
While it isn’t a privacy issue, per se, any more than Amazon.com reporting their financial details to the IRS when they file their taxes, it is an anti-business issue. The problem arises when the IRS audits a business, assuming that “income” equals “profit”. The reality is that the percentage of net profit from those transactions is already reported in the business’ tax filings. If they aren’t filing their taxes, well, shame on them, and the information from their on-line payment processor will reveal that.
