Even better, these forms will include only the gross amounts—i.e. the payments made excluding any fees these companies or other intermediaries may charge—or returns, chargebacks or refunds.. As most of us well know, a payment of $100 often doesn’t translate into a profit of $100, so it will be on the merchants’ shoulders to report all fees among other business expenses.
Naturally, the IRS is worried that online merchants aren’t reporting their income, either through ignorance or willful tax evasion. Reporting forms like the W-2 and other 1099s help tax payers to know what they have to pay taxes on (um, everything) and exactly how much they earned. (It’s a heck of a lot easier than going through your records yourself, but you might still have to to get the fees.)
According to Barbara Weltman for Auction Bytes,
All merchants who accept payments through credit cards, debit cards, gift cards and PayPal will receive information returns telling them – and the IRS – the gross amount of the merchant card transactions. This will be broken down month by month. While the form uses the word “card,” the IRS has made it clear that this is interpreted broadly to include third-party network transactions (i.e., PayPal).
There is at least one loophole: if you’re just not that good an online merchant. Small merchants, making $20,000 or less in 200 or fewer transactions, will not require 1099 reporting.
Ultimately, there probably won’t be an effect if you’re already reporting your online income accurately. Will the new laws affect you?
We are SO not tax lawyers or accountants, it’s not even funny. Please consult someone who is to learn about your tax responsibilities.