Within Senator Christopher Dodd’s 630-page Senate housing legislation is a provision that nobody knows about, but affects the privacy and operation of nearly all of Americaâ€™s small businesses. The provision, which was added by the bill’s managers without debate this week, would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.
Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee.
What does this mean for you and me?
If you’ve ever sold your old iPod on eBay, chances are you won’t be affected since you’ll be getting only a fraction of what you originally paid for it and the income isn’t taxable. However, if you’re one of thousand of eBay sellers and other small business owners who accept PayPal or any other electronic form of payment… that information could be now reported to the IRS.
Of course eBay sellers and small business owners should have been paying taxes on this income all along, but the fact is… they haven’t. For example, if you make money online using Google Adsense, Google isn’t required to report your income to the government until you’ve earned over $600. And since the income isn’t reported, most people don’t report it as income on their 1040. In fact, the government estimates that this bill will bring in an additional $9.802 billion over ten years.
Whether you report your small business income or not, this bill could be an invasion on everyone’s privacy. If you’re concerned, be sure to write your representative.