Many sellers on eBay likely report their gains for tax purposes as they are required to do. Some people may not know they are supposed to do this, or actively choose not to pay. The Internal Revenue Service wants to make eBay and other auction sites part of the process that reports that income.
When it comes to the law, definitions can be changed to fit the times. The definition of the word “broker” as it pertains to the reporting of who earns what on an online marketplace like eBay doesn’t include those sites today.
In the future, that could change. The San Francisco Chronicle noted the longing looks the federal government has cast at sites that aren’t considered brokers by law.
Change the definition, and it could mean a windfall for the government as more people receive those Form 1099 mailings that eBay and others would be required to send. It would put a burden on eBay to track its sellers and their sales when people earn $5,000 or more, or if they are part of more than 100 transactions.
An eBay spokesperson cited in the report said the company doesn’t fall into the broker definition as of now. EBay doesn’t take possession of the items sold through the site. Those transactions have the item ship from seller to buyer.
One segment of eBay’s Power Seller populace isn’t very concerned with the proposal of heightened attention for sellers:
David Yaskulka, marketing chairman for the Professional eBay Sellers Alliance, an industry group of more than 500 big eBay sellers, said it wouldn’t bother him if eBay reported sales information about its users to the IRS. In his experience, big sellers already pay their fair share.
“Every professional seller I’ve ever talked to pays their taxes and has no problem with anyone finding out about the level of business they’re doing,” Yaskulka said.
Formal discussions in Congress about the proposal and other tax issues should begin in a few short weeks. EBay sellers should keep an eye on this. If the definition of “broker” receives a little editing, they need to make sure their tax situations are in order.
If they don’t, the IRS will. They define that process as an “audit.” And federal auditors are not nearly as cuddly as the Beanie Babies many people sold on eBay, either.
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