“Housing Bill” Affects E-commerce Merchants
Last week, President Bush signed the Housing and Economic Recovery Act of 2008 into law. Sure, another law will fix it. Hidden in the 700-page bill are a couple of totally unrelated provisions. One relates to hurricane recovery and gives tax breaks to a Canadian railcar manufacturer in Alabama. Of course, in true government style, this has nothing to do with housing relief but after all, someone had their hand out and got their hand-out.
There’s also some provisions in the bill for home buyer credit; provided that you’re a first-time home buyer between April 8, 2008, and July 1, 2009, and make under $150,000 ($75,000 if you’re single.) And there’s an additional $1,000 standard deduction against property taxes ($500 if you’re single.)
You wouldn’t think any of this has anything to do with E-commerce merchants that accept credit cards, but you’d be wrong. You’d be wrong because there’s also something in the law for us lucky merchants. Starting in 2011, banks or other companies that process credit cards must report the amount of the payments a merchant receives on card transactions to the IRS. The law will not apply to merchants doing less than 200 transactions totaling less than $20,000. We can all thank PayPal (thank you PayPal) that the exemption amount isn’t $600. Yep - they tried to make it $600, a whopping $50 per month, but PayPal successfully lobbied to raise it to the current level.
So, starting in 2011, even some smaller e-Bay sellers will have their income reported to the IRS.
Just thought you should know.
I do not understand why that is an issue.
By law we must report our income. If we are working legally this does not effect us at all.
And all deposits are to a checking account so there is already a paper trail for IRS already to track all deposits.
August 5th, 2008 at 11:28 amI’m not sure it’s an issue to most merchants other than additional paperwork since you’ll get something similar to a 1099.
On the other hand, I wonder how many personal eBayers will be affected.
And then there’s processors, banks, PayPal, 2CO, etc. It looks like all of them are going to have a massive job ahead of them.
August 5th, 2008 at 12:11 pmAnd my personal experience with bureaucracies says the merchant account companies will neglect to deduct any refunds, voids, and chargebacks. Mr IRS will assume we under-report by that amount…
I know my CPA will be smiling. Another form, another few dollars to them!
August 5th, 2008 at 2:04 pmAnd… who do you think is going to fund the extra manpower needed at the processors to report this to the IRS? I’m sure they will just take that as a cost of doing business, without passing it on to the merchants [/sarcasm]
August 6th, 2008 at 2:32 pm