TT Note: How about trying this little tidbit on for size? This little ole provision for 1099 reporting was unknown to me and I'm willing to guess it's unknown to a whole lot of people. Be careful. This little provision and the way the credit card processors do business is about to get real sticky. You know, the one person, one account scenario? Could be tough trying to prove to Big Brother that you and your business are two accounts.
/PRNewswire/ -- Many small businesses and payment processors were surprised to learn the Housing Economic Recovery Act of 2008 included a provision creating an IRS 1099 reporting requirement for all credit card payment providers (i.e. PayPal, Google Checkout, Amazon) to report individuals that receive deposits totaling more than $20,000 from over 200 debit/credit card transactions in one year. The proposed provision could deliver tax revenue in the amount of $9.529 billion over 10 years but at what cost?
For payment processors this is not just a simple matter of developing an accounting and reporting system. Payment processors will need to integrate tax reporting into their customer facing applications; they will have to change the way they collect and authenticate account holder data; they will have to setup customer service support for tax related inquiries and they will likely have to change the fundamental way they look at account holders.
It only makes sense that account holders will now want to setup 2 accounts, one for business and one for personal use. While this may seem obvious and trivial, this presents a problem for a number of payment processors who view the world as 1 person equals 1 account. Payment processors will have to adjust their velocity systems to pool accounts which can increase record keeping costs, customer service inquiries and maintenance costs.
Of course some sellers, not so honest ones, may also utilize multiple accounts (i.e. 1 personal, 1 business, 1 in my wife's name) to purposely spread out revenue. Some sellers from auction sites such as eBay or Craig's List will attempt to avoid the reporting requirements by diversifying their payment strategy. This would entail utilizing several different payment processors to try and go 'unnoticed' by staying under the reporting threshold with any single processor.
Payment processors will also have to deal with the potential for brand damage from "guilt by association". This association will come from account holders expressing displeasure of the new requirements in the blogosphere and from the increased damage caused to fraud victims. In terms of fraud, fraudsters that setup accounts using stolen identities will be causing 1099 income to be reported on the victims. In this case a 1099 would be generated and the consumer may not have any idea that it has occurred until they are contacted by the IRS for not reporting the income. The burden of proof will be with the taxpayer to prove their innocence to the IRS, and the burden of proof will be on the payment processor to prove to the victim they didn't do anything wrong. Needless to say, this scenario is likely to receive a lot of attention in the press and blogosphere that a payment processor wants to avoid.
For a more detailed discussion on the impact of the new payment processor reporting requirements from the Housing Economic Recovery Act of 2008 go to http://www.fraudpractice.com/housingrecoveryact2008.html .
-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter and Facebook
No comments:
Post a Comment