IRS will now know your credit card purchases

[Guest guest]

" The provision is tucked away on page 615 of the 631-page housing bill filed

last week by Sen. Christopher Dodd (D-Conn.), chairman of the Senate

Committee on Banking, Housing and Urban Affairs, and ranking member Sen.

Richard

Shelby (R-Ala.) "

 

Housing bill provision rattles privacy, small business groups

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It would require all electronically processed payments to be reported to the

IRS, raising identity theft, financial issues for merchants

 

 

June 26, 2008 (Computerworld) Senate legislation to address the housing

crisis by helping homeowners who face foreclosure contains a measure that has

nothing to do with housing and could harm millions of small merchants, privacy

and small-business groups say.

The _housing bill_ (http://banking.senate.gov/public/_files/AYO08900_xml.pdf)

calls for credit card companies as well as Internet companies such as _eBay

Inc._

(http://www.computerworld.com/action/inform.do?command=search & searchTerms=eBay+I\

nc.) , _PayPal Inc._

(http://www.computerworld.com/action/inform.do?command=search & searchTerms=PayPal\

+Inc.) , Google Inc. and Amazon.com Inc.,

which electronically process payments for merchants, to track, aggregate and

report information to the _IRS_

(http://www.computerworld.com/action/inform.do?command=search & searchTerms=Intern\

al+Revenue+Service) on the payments they make

to merchants. The reporting provision would apply to merchants who earn more

than $10,000 and make more than 200 transactions annually.

The provision is tucked away on page 615 of the 631-page housing bill filed

last week by Sen. Christopher Dodd (D-Conn.), chairman of the Senate

Committee on Banking, Housing and Urban Affairs, and ranking member Sen. Richard

Shelby (R-Ala.)

The measure, which is expected to bring in $9.8 billion over 10 years, was

included in the housing bill to raise money to offset the costs of

implementing the bill by collecting more taxes from merchants. But the process

has

raised the concerns of privacy groups and small-business organizations over

higher

risk of identity theft and a greater financial burden on merchants.

Small merchants who use their Social Security numbers as tax identification

numbers will have to turn those numbers over to credit card companies as well

as to the companies that electronically process their payments, said _Ari

Schwartz_

(http://www.computerworld.com/action/inform.do?command=search & searchTerms=Ari+Sc\

hwartz) , vice president and chief operating officer for the

_Center for Democracy and Technology_

(http://www.computerworld.com/action/inform.do?command=search & searchTerms=Center\

+for+Democracy+and+Technology) (CDT).

" Today, those companies don't keep merchants' Social Security numbers, " he

said. " Some credit card companies or banks require them when you set up an

account, but the typical course is for them to then set up a merchant

identification number and get rid of those Social Security numbers. That storage

does

not take place today. "

But it will take place if the bill is passed, raising the risk of identity

theft if the information is misused, Schwartz said. Although the provision

will also affect large companies, those companies will not be at risk of

identity theft because they typically use a government-issued tax

identification

number rather than Social Security numbers when they file their taxes.

" That's why the credit card companies don't take it in and store it today,

because they have concerns about how it's going to be used internally and when

they pass it on to others, " Schwartz said. " They're concerned about the

liability they have in storing the information. "

The Senate Committee on Finance, which has jurisdiction over tax matters,

acknowledged that the provision is designed to bail out the housing sector by

helping the IRS more efficiently collect the taxes it is owed, but said no

small merchants will be hurt by the legislation.

The finance committee, in a news release, _said_

(http://finance.senate.gov/press/Bpress/2008press/prb062308%20housing%20bill%20p\

ayment.pdf) the reporting

provision won't be detrimental to small businesses because it requires the

banks to do the additional reporting, not the merchants. In addition, the

committee said only the IRS will have access to the data that is reported.

" This proposal asks for the same type of personal taxpayer information that

other information reports currently required by the IRS contain, " the

statement said. " Merchants voluntarily enter into credit card arrangements with

banks and voluntarily provide private information during that process. Banks

are

subject to their own privacy laws and policies. Existing law already strictly

protects the privacy of taxpayer records. "

 

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