A recent bill signed by President Bush is going to allow the IRS to snoop into company pockets even more.
The new bill will require payment processors, like Visa and MasterCard, to disclose all of the electronic payments processed for each business for the prior calendar year. Third-party processors — like PayPal, eBay, and Amazon — are also required to disclose the info if the payments to a business are over $20,000 or there are more than 200 transactions in a year.
Plus, payment processors will be required to verify each business’ Taxpayer Identification Number (TIN) or withhold 28% of the payment due to the business until their TIN can be verified.
The bill’s expected to boost tax revenue by $9.8 billion over a decade and takes effect in 2011.
It’s already stirred up some dust from groups that represent small-businesses and independent contractors.
The new rule’s being put into effect to help close the tax gap and to stop businesses — especially independent contractors — from under-reporting their income.
But the under-reporters aren’t the only ones up in arms about the bill. The National Association for the Self-Employed (NASE) worries that card processors are going to raise merchant fees thanks to the extra work. Not to mention the extra cost and work on their end because they’ll have to make sure what the processor files matches what they report on their income-tax.
NASE’s planning to fight for a repeal of the bill saying it unfairly places a burden on small businesses in an attempt to close the tax gap.