The IRS is looking for you........

The IRS is looking for you........

Post by Joe Sewe » Sun, 27 Jun 1999 04:00:00




Quote:

>I was talkking with a friend the other day about eBay and he told me
>something that I had thought about before. He told me that thru a very
>good source he heard some startling news.
>Seems that the IRS has created a division that is only concerned with
>online auction companies. They are tracking and logging information on
>buying and selling practices of frequent users. What they are trying to
>establish is a case against paying sells tax and non-reported earnings
>on Income Tax returns. So those of you that think that you can make that
>extra cash every year without reporting it, might just ahve to answer to
>somebody up the line.

The unreported income on the 1040, I can believe.

Assuming you meant they want to "establish ... a case against paying SALES
tax," though, I cannot understand that one.  Sales tax is a state tax, not
a Federal tax.  (Or would the IRS get involved there, too, if it's
interstate?)
--

========================================================================

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The IRS is looking for you........

Post by Joe Sewe » Sun, 27 Jun 1999 04:00:00


Quote:

>Just to make things clear, any time you send more than $600 to an
>individual, you are obligated to withhold payment until they fill out and
>return a W-9 (request for taxpayer identification) and I-9 (to make sure
>they are a legal resident.)  You are not obligated to have these forms
>filled out if you are purchasing from a corporation......but getting a W-9
>is really the only sure way to know that you are purchasing from a
>corporation.  Also, the payment you made to the individual is required to be
>reported to the IRS on a 1099 to make sure that the seller lists the money
>as income (if the payment is more than $600.)  Even if the transaction
>amount is not more than $600, the person or corporation receiving the money
>is still required to report the receipt as income (as long as their basis is
>less than the amount received.)  I'm only a lowly accountant (not a CPA,) so
>anyone feel free to correct me if I'm wrong.  Although these are the laws, I
>personally think that they are widely ignored on Ebay and other internet
>sites.

Not to mention flea markets, garage sales, etc.

Being completely ignorant of accounting & tax law, I need an explanation
of your statement "as long as their basis is less than the amount
received."  Exactly what is a "basis" in this context, and how would it be
determined for an individual?
--

========================================================================

                 * grown up if you can't act *
Is reality merely* childish?                 *       AOL: JoeS10
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The IRS is looking for you........

Post by Joe Sewe » Sun, 27 Jun 1999 04:00:00



Quote:


>>>>......Also, the payment you made to the individual is required to be
>reported to the IRS on a 1099 to make sure that the seller lists the money as
>income (if the payment is more than $600.).......I'm only a lowly accountant
>(not a CPA,) so anyone feel free to correct me if I'm wrong.....<<<

>Where's Roxanne (the CPA) when we need her?

>I'm not even a "lowly accountant", but as a self employed individual I do
>receive 1099's. They list miscellaneous income paid to an individual in excess
>of $600 during a calender year....total....not per transaction.

>I believe these forms only apply to payments for services rendered and not for
>sale of merchandise. If that were the case individuals would have to send out
>1099's to every merchant to whom they gave more than $600 worth of business
>during the year.

Not quite true.  Those who make a side income in network marketing
businesses (such as Amway, Excel Telecomm., etc.) must report annual
earnings of $600 or more, and that includes product sales and
commissions.  In fact, if they pay out commissions of $600 or more to
their downline, that must be reported on a 1099, a copy of which must be
given to the downline.  (I believe, though, that the copy only applies
when $600 or more is paid to a single downline; otherwise, the individual
isn't required to file a 1099.)

That's all from memory, back when we were in Amway & Excel.  We never
reached the $600/year level, so I could be wrong with the product sales.
I do remember that being true for commissions, though.

Quote:
>Can you imagine being required to issue a 1099 to your local supermarket each
>year....what a nightmare.

The supermarket handles this differently; they aren't required to track
income from individuals.  They can lump "sales" together in one lump sum.
(Likewise, the network marketer wouldn't have to track sales to
individuals for IRS purposes, although they may need to retain receipts of
sales, which may or may not be tracked down to an individual.)
--

========================================================================

                 * grown up if you can't act *
Is reality merely* childish?                 *       AOL: JoeS10
virtual fantasy? *              - The Doctor *

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The IRS is looking for you........

Post by Joe Sewe » Sun, 27 Jun 1999 04:00:00



Quote:

>I believe that this was strictly for IRS and earnings tax. Now as far as state
>sales tax goes, I would think that would be just down the road. Correct me if
>I'm wrong but haven't I seen on eBay auctions some states have to pay sales
>tax? Such as if they were buying from a legitimate liscensed coin dealer.

Sales tax involving interstate transactions is nebulous.  I've heard that
a business is supposed to collect sales tax on any sale, but I believe the
actual laws are up in the air right now.  (If I, in Florida (6%), sell
something to a buyer in Maryland (5%), do I charge 6% sales tax because
I'm in Florida, or 5% because the buyer is in Maryland?)

Most people either collect their state's sales tax for intrastate sales,
or ignore the whole thing.

Quote:



>> < What they are trying to establish is a case against paying sells tax and
>> <non-reported earnings on Income Tax returns.

>> Are you talking strictly Federal IRS?  Never heard of a Federal sales tax.

--

========================================================================

                 * grown up if you can't act *
Is reality merely* childish?                 *       AOL: JoeS10
virtual fantasy? *              - The Doctor *

   Fight Spam! Join CAUCE (Coalition Against Unsolicited Commercial Email)
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The IRS is looking for you........

Post by <Dus.. » Sun, 27 Jun 1999 04:00:00


The basis is your cost that you paid for that particular item.  If you
purchase a coin for $500 and sell it for $600, your basis is $500 and your
reportable income is $100.  Although on your tax return, you would show the
entire $600 as income, you would also show the $500 purchase and deduct that
from the income for a taxable income of $100.


Quote:


> >Just to make things clear, any time you send more than $600 to an
> >individual, you are obligated to withhold payment until they fill out and
> >return a W-9 (request for taxpayer identification) and I-9 (to make sure
> >they are a legal resident.)  You are not obligated to have these forms
> >filled out if you are purchasing from a corporation......but getting a
W-9
> >is really the only sure way to know that you are purchasing from a
> >corporation.  Also, the payment you made to the individual is required to
be
> >reported to the IRS on a 1099 to make sure that the seller lists the
money
> >as income (if the payment is more than $600.)  Even if the transaction
> >amount is not more than $600, the person or corporation receiving the
money
> >is still required to report the receipt as income (as long as their basis
is
> >less than the amount received.)  I'm only a lowly accountant (not a CPA,)
so
> >anyone feel free to correct me if I'm wrong.  Although these are the
laws, I
> >personally think that they are widely ignored on Ebay and other internet
> >sites.

> Not to mention flea markets, garage sales, etc.

> Being completely ignorant of accounting & tax law, I need an explanation
> of your statement "as long as their basis is less than the amount
> received."  Exactly what is a "basis" in this context, and how would it be
> determined for an individual?
> --

> ========================================================================

>                  * grown up if you can't act *
> Is reality merely* childish?                 *       AOL: JoeS10
> virtual fantasy? *              - The Doctor *

>    Fight Spam! Join CAUCE (Coalition Against Unsolicited Commercial Email)
>    at http://www.cauce.org/ and tell your Congresspeople how Spam mailings
>    hurt you.  Help protect genuine Internet commerce: Outlaw UCE Spamming.
>    (This anti-Spam signature is available rent-free.  Inquire within :-) )

 
 
 

The IRS is looking for you........

Post by VVALHAL » Sun, 27 Jun 1999 04:00:00


Quote:
>Assuming you meant they want to "establish ... a case against paying SALES
>tax," though, I cannot understand that one.  Sales tax is a state tax, not
>a Federal tax.  (Or would the IRS get involved there, too, if it's
>interstate?)

Where there is tax money available a politician is sure to follow. When the
sales tax waiver expires we can all expect an internet tax that would be
"equitably paid" to the U.S. federal coffers.
Or maybe not,
Dennis
 
 
 

The IRS is looking for you........

Post by Aram H. Haroutuni » Mon, 28 Jun 1999 04:00:00


Quote:



>[snip]
>>Seems that the IRS has created a division that is only concerned with
>>online auction companies. They are tracking and logging information on
>>buying and selling practices of frequent users. What they are trying to
>>establish is a case against paying sells tax and non-reported earnings
>>on Income Tax returns. So those of you that think that you can make that
>>extra cash every year without reporting it, might just ahve to answer to
>>somebody up the line.

>While the Infernal Revenue Service has every right (and responsibility)
>to investigate possible non-reported earnings, they should have absolutely
>*zero* interest in sales tax, which is levied/collected at the state level.
>With half of the above premise questionable, I'm leery of the other half
>as well ...

><humor> But who knows?  The government has many, many special
>agencies involved in tracking what individuals do on the Internet.  Why,
>just this minute, a black helicopter appeared outside my office window
>and pointed some sort of antenna in my direction ... But that by itself

>&$$$$*#(((QWEQ       **NO CARRIER***
></humor>

"You're just too true to be good
 I'd close my eyes if I could,"
etc.  :-)  or something like that.  :-)  Aram.