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Tue Nov 21 2006 17:42:55

eBay Sellers and the IRS

By: Ina Steiner

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I wrote today about a USA Today article on eBay and the IRS. An IRS advisory committee recommended that the IRS require Internet business sites like eBay to get tax identification numbers from all sellers.

Going back to my article, "Fraud: What's an Online Auction Site to Do?" you can see that some marketplaces already require that sellers submit tax ID numbers. Those sites might have an easier time reporting to the IRS than a site like eBay, which does not collect tax ID numbers, nor does it aggregate sales from multiple accounts for individual sellers (many if not most serious eBay sellers have multiple accounts).

The real question is how would the IRS use the information provided to them from online marketplaces. Would they simply use it to aid them in audits, or would they use it to target sellers by either matching eBay data to all returns, or random returns? The IRS already tracks payments through 1099s and W2s, which is the closest comparison I can make to what this committee is suggesting. I'm not a tax expert, though, so comments welcome.

eBay would likely lobby against IRS reporting requirements. It already has a Main Street program in place to fight government regulation.

Resources for sellers:

The IRS has a page on its site devoted to online auction sellers.

Software tools like Quicken help sellers stay organized.

"Tax Loopholes for eBay Sellers" is a book that aims to help eBay sellers answer questions about tax matters.

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