IRS to Track Online Sellers’ Payment Transactions

A very interesting tidbit on Auctionbytes about a new requirement for IRS reporting of third-party Internet sales. It’s unclear whether low-volume Amazon merchants can continue to fly under the radar (not something I advocate). I have asked Amazon’s seller support team for clarification on this, and will post again when (and if) I hear a reply.

Update: I received a quick reply from Amazon, but as usual, the answer was not entirely illuminating:

In reviewing your email, I understand that you would like to know whether Amazon reports transactions to IRS.

I would like to inform you that as of now we do not have any provision of reporting transactions to IRS. Once the feature is implemented we will notify all our sellers on our website.

An excerpt from the Auctionbytes article:

Starting next year, any bank or other payment settlement company that processes credit cards, debit cards, and electronic payments such as PayPal will have to issue information returns telling the IRS what merchants receive. The new returns are Form 1099-K, Merchant Card and Third-Party Payments.

The IRS believes that many online sellers fail to report their transactions. Some don’t report because they mistakenly believe that Internet sales are invisible. Others do so because they are trying to evade taxes.

The IRS has found that using information returns, such as W-2 forms for employees, Form 1099-MISC for independent contractors, and Form 1099-INT for bank interest, goes a long way toward improving the reporting of income. IRS computers can match income reported on these information returns with the income reported on tax returns.

All merchants who accept payments through credit cards, debit cards, gift cards and PayPal will receive information returns telling them – and the IRS – the gross amount of the merchant card transactions. This will be broken down month by month. While the form uses the word “card,” the IRS has made it clear that this is interpreted broadly to include third-party network transactions (i.e., PayPal).

via IRS to Track Online Sellers’ Payment Transactions Beginning Next Year.

Related posts:

1. eBay’s Half.com warns sellers it will report transactions to IRS for 1099-K income tax purposes
2. Bookselling Roundup: The IRS wants a cut of your book sales