dcsimg
Blog
August 26th, 2008

Housing Bill + Tax Gap = New IRS Reports

by

 

For months different versions of the housing rescue bill were kicked back and forth between lawmakers, debating and rejecting various stipulations that called for tax credits for first-time homebuyers, as well as financial relief for businesses and communities weakened by the housing crisis. So how did a mandate involving credit cards and the IRS wind up somewhere in between government-backed refinanced mortgages and counseling for lending agencies?

In an attempt to narrow the national tax gap, starting in 2011 lawmakers will require that every merchant who collects over $20,000 in payment-card transactions, or over 200 card transactions, be reported to the IRS:

While the new rule may bring more IRS audits, it’s also aimed at encouraging business owners to report income accurately. “It’s probably designed to lead to increased compliance,” said Mark Luscombe, a principal analyst with CCH Inc., a Riverwoods, Ill., tax publisher.

“If the IRS, through this system, gets information on a merchant that shows X amount of credit-card sales and their statistics show that type of merchant probably has 80% of their business done on credit-card sales, and total reported revenue doesn’t seem to mesh up, it probably will result in audits,” Luscombe said.

Neither business owners nor payment-card processors are very happy over the upcoming arrangement. The new stipulations are likely to increase costs, which always seem to find their way back to the consumer:

Small-business owners are worried about higher costs under the new rule. “The credit-card companies or the banks are going to have to build this [reporting] system out. That cost is likely to be passed on to the small-business owner,” said Bill Rys, tax counsel for the National Federation of Independent Business, a trade group in Washington.

They’re also worried about mistakes because any mismatch or problem related to a business owner’s taxpayer identification number on the report means the payment processor creating the report must withhold 28% of the total sales. That’s a 28% hit to gross sales, not taxable income.

The American Bankers Association is especially displeased with the mandate, as expressed in a letter submitted to lawmakers:

“This burdensome unfunded mandate would impose hundreds of millions of dollars in costs on the business community. In order to comply with this mandate, the payment card industry and its third-party processors would be required to fundamentally redesign card processing systems that were developed to accommodate the efficient and reliable processing and settlement of transactions between consumers and merchants.”

Share and Enjoy:
  • email
  • Print
  • RSS
  • Add to favorites
  • Yahoo! Bookmarks
  • Facebook
  • Twitter
  • Technorati
  • Digg
  • del.icio.us
  • Google Bookmarks
  • StumbleUpon
  • Yahoo! Buzz
  • Mixx
  • BlinkList
  • Live
  • Reddit

5 Responses to “Housing Bill + Tax Gap = New IRS Reports”

  1. Rebecca Wilder Says: August 26th, 2008 at 12:26 pm

    This is certainly a step in the right direction! Why should the US government raise taxes when firms and consumers are already evading their current tax bills? I am all for paying a higher marginal cost to small businesses (if there will indeed be any) because if the IRS actually get’s its act together and collects all of the taxes owed to it, then marginal income tax rates should not grow as quickly in the future (provided spending is in check, at least slightly).

  2. Tim Manni Says: August 26th, 2008 at 12:53 pm

    I assume this bill couldn’t stand on its own so it got mixed up in the housing bill. Hey, it’s a bill aimed at improvement, so why not right.

    *Rebecca — if you can edit your comments on newsneconomics.com, could you correct the link in my name to http://blog.hsh.com (I forgot the “http://” and my name link comes up as an error on your page. Thanks!

  3. Rebecca Wilder Says: August 26th, 2008 at 4:32 pm

    Done.

    I also added you to my blogroll; do you have one to add me?

    And that housing bill was a crazy mess anyway. It was only passed because of Fannie and Freddie, and now the Street is talking about a government takeover? Looks like the two are in too deep to draw on the extended US Treasury line of credit. We will see.

    R

  4. Tim Manni Says: August 26th, 2008 at 4:55 pm

    Thanks Rebecca. Our webmaster is setting up a blogroll so we can add newsneconomics.

  5. Bookmarks about Housing Says: December 29th, 2008 at 10:45 pm

    [...] – bookmarked by 5 members originally found by McBrett on 2008-12-01 Housing Bill + Tax Gap = New IRS Reports http://blog.hsh.com/?p=303 – bookmarked by 2 members originally found by magicmeg on 2008-11-21 [...]

Leave a Comment

Receive Updates via Email

Delivered by FeedBurner

About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

Connect With Us

  • rss feed icon
  • facebook icon
  • twitter icon

Compare Lowest Mortgage Rates

$