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Consumer Transaction Reporting Law
Buried deep within the housing legislation recently signed into law was a provision that "calls for credit card companies and Internet companies, such as eBay Inc., its affiliate PayPal Inc., Google Inc. and Inc., to track, aggregate and report information to the IRS on the payments they make to merchants."

Taking effect in 2011, the provision has raised concerns among both small business watchdogs and privacy supporters. A press account notes that "privacy advocates have said the legislation will allow the government to maintain a federal database of all the transactions made by millions of small businesses via credit cards or through e-commerce companies, and that database that will be a lure for identity thieves." An official with the Center for Democracy and Technology stated that "Our focus was the privacy implications of this provision. The banks not keeping that information around is a good information security practice."

Testifying before Congress, the Electronic Transaction Association explained that a similar proposal "would: (1) provide potentially misleading information to the IRS; (2) create a costly new reporting requirement that would increase consumer prices; and (3) drive small businesses away from accepting payment cards." Other analysts have raised concerns the data reported would not be effective at helping uncover tax cheats since "payment card companies would only report credit transactions, and businesses would report income from both credit and cash transactions...the IRS will not be in a position to reconcile this information efficiently and accurately."

Regulations implementing the legislation need to closely adhere to the requirements of the good government laws including the Regulatory Flexibility Act and the Paperwork Reduction Act.

See news story

See ETA Testimony

See Tax Notes analysis

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