IRS goes after eBay, wants info on seller earnings.

The IRS wants its money. That’s why it has helpfully assembled a list of the most common excuses people use (PDF) for not paying their taxes. In case you weren’t aware of it, a claim that "the 16th Amendment is invalid because it contradicts the original Constitution, was not properly ratified, and lacks an enabling clause" won’t fly with the government. In the same spirit, the government has recently been leaning on eBay to make sure that sellers are not dodging their own tax responsibilities, but eBay wants no part of the government’s plan.

This is an ongoing saga, but the Financial Times has a wrapup of the current situation. In short, the US government wants to treat eBay as a "broker" who would then be required to file notices with the government about how much money its traders have made. The US proposal calls for this reporting to take place only when people sell more than several thousand dollars worth of merchandise in a year.

With so many people making part or all of their living through eBay, the government wants its cut. This isn’t an issue of any new taxes, but an attempt to collect the income tax that is already required. Because eBay does not report information about its sellers to the government, income reporting is left up to individuals, and the temptation not to list eBay revenue as income can be a strong one—and in some cases, it’s not always clear when one has to do so.

The government believes that tougher enforcement of the rules could net as much as $2 billion a year, which isn’t chump change, even to the Feds.

eBay is resisting calls for it to file any documents, saying that it does not fit the definition of a broker, and that to selectively target it puts the company at a competitive disadvantage. eBay apparently believes that sellers would go elsewhere if they knew that the government would learn how much they made in a given year. A San Francisco Chronicle on the subject points out just what a difference such reporting makes. When wages are reported directly to the government (as they are on W-2 forms from most employers), 96 precent cough up what they owe. When income is not reported, compliance drops in half.

eBay isn’t the only Internet business that has been feeling the heat in recent months. The government is also considering how to apply tax laws to virtual worlds and goods, and it faces some of the same problems that it does with eBay. While some sellers can make a good living out of hawking such items, few report the profits as taxable income, and Uncle Sam wants its cut.

Finally, in other tech tax news, the IRS has just announced that 30 percent of filers this years have so far missed out on the refund they are owed from a long-distance excise tax. A recent court ruling declared that the tax did not actually apply to contemporary long-distance services, and the government stopped collecting it. Now, they are offering a refund that ranges from $30-$60. Don’t forget to claim the refund; the IRS is publicizing the tax break, but won’t give it unless filers request it.

Via ARS Technica