First there was a health care bill that taxed indoor tanning, now there’s a housing bill that mandates businesses report their debit and credit-card transactions to the IRS – which will likely result in audits. Here again, small business is tapped to feed the coffers where the government anticipates a shortage.
For salon owners, the new law requires a yearly reporting of the “gross amount of reportable transactions” to the IRS. There was some consumer concern that the government would have increased access to individuals’ purchasing habits through this reporting; however, the law doesn’t require salons to divulge any information beyond one figure (the total dollar amount of the salon’s transactions), once each year.
Much like the impending tan tax, which goes into effect July 1, 2010, the IRS has yet to release detailed information regarding the new law.
One tax analyst predicts the new law will result in more audits of tanning salons and other businesses. Because banks and other financial service providers will be providing a report to the IRS, salon owners will be under closer scrutiny when it comes to ensuring their financial reporting information matches up. For example, a salon’s overall revenue can likely be gauged by considering what percentage of that typically results from credit-card purchases. It’s anticipated that salon owners will also receive a copy of the credit-card issuer’s report, and then it will be their responsibility to reconcile any discrepancies.
Salon owners with less than 200 reportable transactions and $20,000 in credit-card business are not mandated to report their debit and credit-card information to the IRS.
The new requirement will introduce increased demands on the financial organizations that must generate the reports, the cost of which will likely be passed along to small-business owners. An additional concern is the potential financial ramification regarding problematic reports, as executed through gross sales withholdings.
The American Bankers Association has shared its displeasure of the new requirements – and the resulting costs and processes required to implement them – with lawmakers.
Related Article:
Understanding Credit-Card Processing
Source:
MarketWatch: Thanks to new housing bill, credit-card transactions to be reported to IRS
