IRS To Go After eBay Sellers

prostoalex writes "Fed up with numerous violations of tax law by individuals and businesses selling goods on eBay, Amazon Marketplace, uBid.com, etc., IRS is pushing Congress to make online marketplaces responsible for reporting the sales information to the tax man, in order to prevent under-reporting of the income. eBay's 'own statistics suggest that there are 1.3 million people around the world who make their primary or secondary source of income through eBay, with just over 700,000 in the United States', News.com says." How long before the same fate befalls the folks who make a living working the Massively Multiplayer secondary markets?

Nothing To See Here

[pandrijeczko (588093)]

Admittedly, I am in the UK but I'm told that our own Inland Revenue tax people have already started looking at eBay sellers also.

But I don't see how this affects most of us anyway. I've personally done a lot of selling on eBay - no trading, just emptying a lot full of years of accumulated junk. All the stuff I sold was stuff I bought over the years and therefore paid tax and VAT ("Sales tax" in US speak) on the items already so I'm not sure I needed to pay any additional tax.

And as for those who trade o

Re:

[owlnation (858981)]

Yep, the UK Inland Revenue and eBay have been co-operating for a number of years. This is also the case with the equivalents in Germany.

I guess the only question I'd have is: why has it taken so long for the IRS to get involved?

Re:Nothing To See Here

[kt0157 (830611)]

There is no tax due in the UK on your personal property when disposed of, even if at a profit (personal effects are exempt from capital gains tax because they would mostly generate losses to be offset against other gains). If you trade stuff you acquire for re-sale, and you trade enough to go over the VAT threshold (which is quite high), you will have to account for VAT as a second-hands good trade (essentially, VAT is charged on the difference between the buy and sell price). On the upside, you can reclaim VAT on all the kit you use to trade (e.g. computers, fuel, etc.).

In the US and Canada things are a bit different due to sales tax. In Ontario, for example, everyone is required to send a cheque for PST to the Ontario finance minister for all sales of goods, no matter how small, no matter if a yard sale, no matter if a private sale. Of course, not one citizen abides by this crap law (except where the provincial or federal Government can track the ownership of private goods, such as cars, planes and boats). But once EBay are sending nice XML files straight to the Government tax weasels you can imagine a nice automated bill (applied directly to your EBay account, naturally).

Lets simplify the tax code

[G4from128k (686170)]

Perhaps if more people are exposed to the unpleasantness of taxes on their de facto small businesses, then more people would vote for candidates that include tax simplification as a key goal. The current U.S. tax code is a Byzantine mess that is great for accountants, tax attorneys, and tax software companies who add no value to society other than to comply with artificially enacted arcana.

I have no problem paying my fair share (and think everyone should), but I hate that I have to spend so much money and

I support the IRS on this issue

[140Mandak262Jamuna (970587)]

A sale is a sale and income is income. If the law says there is a tax on income it should apply uniformly to everyone. Being a fully computerised market place, such reporting would not be too onerous on E-Bay. In fact small businesses, the mom-and-pop stores would find documenting their tax compliance more burdensome. Banks send out 1099-INT forms listing one dollar and two dollar interest earned. Why cant E-Bay?

When I came to USA first I was amazed to see how much of the expensive stuff is left around the homes completely unsecured. 1000$ grills, 800$ deck furniture, children's toys, garden tools, garden sheds are all left unlocked and no one would steal them. I have lost one tiny bottle of coconut oil left on the sill of an unlocked window in my hostel back in India. Then slowly it dawned on me that most Americans would not buy goods of doubtful provenance from shady sellers. Infact there is a market in b ombay called Chore Bazaar (thief market) which does brisk business. I would very much E-Bay not to degenerate into a giant "Chore-Bazaar.com"

Re:

[vertinox (846076)]

A sale is a sale and income is income. If the law says there is a tax on income it should apply uniformly to everyone.

Oh lordy. You don't know how wrong that statement is because current tax laws are all messed up due to uneven tax brackets. (I'm sure someone will come out of the wood work and post a link to that fair tax website) Secondly, it has always been questionable on how much authority the IRS and the Feds really have on non-interstate commerce.

Even if it is the way the laws are, I will still disagr

Re:

[140Mandak262Jamuna (970587)]

You make me chuckle. At least in my city (where we had 300 murders last year) it is quite common for break ins to your house and car. I had a CD case with CDRs stolen... even though it cost me $200 to replace the window I wonder the surprise of the thief who tried to pawn those off.

You are comparing present state of affairs of USA to some sort of ideal utopian society and find it wanting. I am comparing the very same USA to present state of affairs for 80% of the world population. In most developing nati

Re:

[vertinox (846076)]

You have the right to hold such beliefs and vote accordingly in the elections. Even if you disagree with the law you dont have the option of simply ignoring it. Either challenge it in courts or refuse to obey the law and accept whatever punishment the government dishes out.

True. Just because I disagree with the IRS doesn't mean I won't play my taxes, but I will argue that just because elections are held means that what they do is right. Secondly, if a law is wrong then it should be ignored without civil dis

Re:I support the IRS on this issue

[Rob the Bold (788862)]

A sale is a sale and income is income. If the law says there is a tax on income it should apply uniformly to everyone.

If you're an average person selling off unwanted stuff on ebay and buying the junk you want instead, then you aren't going owe income tax. You already paid income tax on the money you made to purchase your junk years ago. Most of it has not appreciated, to put it bluntly. If the IRS were to start playing hardball and try to tax you on the sale as Capital Gains, you would play hardball right back and show them your original basis and then the IRS would owe YOU for your loss. Likewise if they tried to call it ordinary income -- you're selling it at a loss, so no income. And then you'd started claiming your ISP fees as business expenses, and you'd take the home office deduction for the space you use to photograph and package your old junk. So the IRS won't come after ordinary "garage sale" type transactions.

Natch, this wouldn't apply so much to someone whose business is turning stuff over on ebay. They could be taxed on income the same way the corner store is, because they are presumably making a markup by buying wholesale and selling retail.

When I came to USA first I was amazed to see how much of the expensive stuff is left around the homes completely unsecured. 1000$ grills, 800$ deck furniture, children's toys, garden tools, garden sheds are all left unlocked and no one would steal them.

There's some unwritten rule about not stealing outdoor furniture and stuff like that. Even when my wife was my girlfriend and was living in a "bad" neighborhood, no one ever messed with her porch furniture. Sure there was gunfire in the hood, and her landlord's maintenance guy was murdered a few blocks away. And her house was broken into and her laptop stolen. But the porch furniture was always left alone.

Re:I support the IRS on this issue

[dreamchaser (49529)]

Sales tax in the US is a State (sometimes with an additional % or two for the county) tax. The IRS is in charge of Federal Income Tax. You are comparing apples to oranges.

However, I do agree that our whole tax code is messed up. A flat or consumption based tax would reduce the size of the IRS by an order of magnitude, save taxpayers billions spent on accountants and tax software, and probably bring in more overall revenue than the current system.

The Tax Code is more about power and control than it is about money.

Re:

[TheSpoom (715771)]

You're likely looking for this [fairtax.org].

Re:I support the IRS on this issue

[Registered Coward v2 (447531)]

However, I do agree that our whole tax code is messed up. A flat or consumption based tax would reduce the size of the IRS by an order of magnitude, save taxpayers billions spent on accountants and tax software, and probably bring in more overall revenue than the current system.

Actually it would replace one set of convoluted rules and tax avoidance methods with another.

For example, some proposals suggest only taxing the final sale price to the end use; not the sale of goods required to produce an item. So a house, for example, would be taxed when it was first sold, but the lumber, etc would not be taxed when the builder bought it. While this makes sense on the surface - you only tax the items once; the goal then becomes to either:

1) lower the sales price as much as possible while still getting the desired cash. So, for example I build a home and then take out a $500,000 mortgage on it - which I get in cash. I sell you the house for a dollar and you assume the $500k debt. The government collects tax on a dollar, I have the desired cash and you avoid a large tax bill. This was actually a way to do a tax free sale of assets in the US until the Feds outlawed it via the tax code.

2. find a way for the ultimate end user to be the builder and never sell the house. So I form a corporation for the express purpose of building a home and hire a contractor to do so. Once the house is built I occupy rather then sell it. Since the first sale has not occurred I have not incurred any tax liability. When I go to sell the house I sell the corporation which owns an asset - so unless you tax sales of corporations as well I make a second tax free transfer; or I do 1 above as part of the sale.

A "Fair Tax" as some propose on consumption will not simplify the tax code; all it will do is cause smart people to find new loopholes that Congress will then try to close.

A secondary effect is the impact on such things as home sales - new homes would have to sell for less than existing ones since they would be taxed and buyers tend to look at the final price, not the one "before tax" price.

Of course, Fair Tax advocates simply ignore these points when making their argument. I set next to one on a plane flight, when he brought up the "Fair Tax" and try to sell m e on it I started asking about these things - his response was to get upset and say the details weren't important. At least I shut him up so I could enjoy my book.

No cause you're not a business

[brunes69 (86786)]

There is a big difference between a business who does thousands of dollars a week in businesses son eBay, and a consumer who sells a cell phone/Xbox/etc once in awhile.

They only want to tax businesses. Consumers do not have to pay tax on goods they sell because of the reasons you just stated - they already paid tax on that object. Businesses do have to pay tax because they get to buy these objects tax free.

Re:I support the IRS on this issue

[Snorpus (566772)]

If you buy an item, and then resell it at a higher price, you are no different than the shop around the corner (or WalMart)... the difference between your selling price and your purchase price, less expenses, is income, and subject to income tax. If you're selling used household items (that baby carriage that's been collecting dust for years in the basement), and you sell it for less than you paid for it, there is no income tax (in fact, you *might* be able to deduct the loss, if you have other gains to offset it). Of course, the IRS wants proof that you sold it at a loss.

The fact that you paid income tax already on your wages from your regular job is irrelevant.

Re:

[140Mandak262Jamuna (970587)]

When you make a profit, on something you have owned for more than one year you pay capital gains. If you have owned it for less than a year the profit is deemed income and you pay income tax on the profit. The buyer will pay the sales tax on the price. If the thing you are selling is your home, and you have owned it for more than five years and lived in it for more than two years in the last five years then upto 600,000$ in capital gains is exempted from tax. There could be more laws and issues on it.

Re:I support the IRS on this issue

[140Mandak262Jamuna (970587)]

If you sold your 2000$ lap top for less than 2000$ in E-Bay, you made a loss, there is no tax for you. There are people who scoop up items on garage sales for very low price and resell it in Ebay for a profit. Some of these folks are so good at it, it increases their income substantially. Those who make profit pay tax on the profit. The fact that you sold it to pawn shop, or on the garage sale or on the flea market or Ebay makes no difference. If you make multiple deals, some at profit and some at loss you pay a tax on the net profit, it any. You can deduct the cost of your computer, ISP charges etc as business expense if you used them for ebay work exclusively. If you have paid a professional photographer to take pictures of your car to post ebay you can deduct that too. If you make a net loss you can deduct upto 3000$ of it from your regular income. If you made more than 3000$ loss, you can carry it over to the next year and the year after etc etc indefinitely.

The system is quite fair, indeed.

Two inaccuracies in parent

[G4from128k (686170)]

1) You can sell an object for less than you paid for it and still owe taxes.

If you buy an item for your business, and deduct that purchase from your taxes, and then sell that item later, you owe taxes on it. You can't buy a $2000 laptop, deduct $2000 from you income, and then sell the laptop for $1500 and still retain the $2000 deduction. Beyond this basic fact, the exact tax effects get more complex because it depends on how you are deducting the original purchase of the laptop (either as a Section 179 e

Re:

[DougWebb (178910)]

If you have a "business" that loses money too often, the IRS will start to get suspicious and they will try to declare the business as a hobby. The exact rules are unclear, but you need to be able to show the IRS that you really are trying to make a profit, are dependent on that income, etc.

The last time I checked, the rules were pretty clear: you had to have a net profit in two or three of the past five years, or something like that, in order to claim the activity as a business rather than a hobby. That

Re:

[gnasher719 (869701)]

'' This is EXACTLY what is wrong with our system. If you make money then you are a business or hobby and get taxed but if you lose money then it's a different game. You can't be a business and STILL have to pay taxes as they want to tax anything over $600. ''

You haven't thought this through. So you think anyone with a money losing business should be able to deduct their losses from tax. Well, apart from my normal job I run a few businesses. One business is selling reviews of CDs, DVDs and videogames. Had a

Re:

[140Mandak262Jamuna (970587)]

All IRS is demanding EBay to do is to report the sales and identify the sellers. It is the responsibility of the sellers to calculate capital gains or short term profit and pay taxes if any. The demand from IRS is simply a tool to verify tax compliance. Nothing more.

Schwab, Vanguard and Alex Brown send me 1099-(B/Div/Int) and it reports every sale I made last year, identify the security, date of transaction and net proceeds from the sale to IRS and to me. The data is machine readable. IRS checks to see i

Over Reactions.

[jellomizer (103300)]

That is what I call an over reaction. Put it plane and simple if you make money the Irs wants to know abut it. If you make your money working in a 9-5 job or as a criminal. If you make money on EBay they are going to tax you if you make your money selling weapons for Online video games you should pay taxes for that. No the IRS Will not probably go after you if you make say $1000 for selling something you didn't need heck most of the time you could record it as a net loss. But for people who buy and sell

What's so strange about it?

[Gadzinka (256729)]

I don't understand what could be wrong with it.

I don't know about eBay, but I know for a fact, that there are people in Poland using local auction service that move tens if not hundreds of thousands $ worth of stuff monthly, without paying any taxes on that. Polish revenue service lately started monitoring it closely and collecting from those people, reassuring all the time, that they are not interested in people using internet auctions for a garage sale. As far as I know, that is true.

Whether you believe in taxes, is another matter, but I don't see why certain individuals should get a tax break just because it is difficult to hold them accountable. It's within a power of the state to levy taxes and create the law to help with it. And sometimes the state forces some reporting duties on some entities in order to help the state. Take for example your salaries: in most countries employers are forced to report the salaries of the employees to regulatory and/or revenue agencies, and I don't see anyone screaming bloody murder.

Robert

Profit

[nurb432 (527695)]

Sooo if i sell everything as an 'official' loss, i guess their tactic will backfire.

Re:

[pla (258480)]

Sooo if i sell everything as an 'official' loss, i guess their tactic will backfire.

Actually, you make a damned good point!

If the IRS wants to classify EBay as self-employment income, you get to deduct your costs. For those using EBay as a primary source of income, that would have the desired effect; For those who just want to get rid of trash in their attic however, selling at a considerable loss compared to the original purchase price, this could really come back to bite the IRS hard.


Of course, t

Who gets to decide?

[by Anonymous Coward]

But who gets to decide if it's a primary or secondary income?
If someone sells a car on ebay as a one-time deal, is it really income or a net loss by depreciation? All the IRS sees is dollar signs without understanding the meaning behind them.
a) It can be someone trying to stem losses.
b) It can be someone trying to liquidate a deceased family member's estate. (Do you believe someone should pay a tax on another's death?)
c) It can be someone in the bay area who can't even afford any roof over his head on a s

Paying the Real Bills

[Doc Ruby (173196)]

How long before the same fate befalls the folks who make a living working the Massively Multiplayer secondary markets?

Why shouldn't they pay their taxes like the rest of us do, if they live in the US? They also count on the cops protecting their house and their jogging girlfriend (or sister), the firemen saving them and their cats from their careless neighbor leaving the iron on. They need the gas station attendant to read well enough that they don't damage their car while changing the oil. They want the courts to stop the chemical factory upstream from poisoning them. They want that border protected with at least the threat of reprisal in case China doesn't stop at Taiwan, and invades Alaska.

I know the rest of us do, and we pay for it. Why should we pay for them to be safe, too, just so they can work in a game in their pajamas?

What we should change is what we're paying for. We shouldn't pay the government for the money we earn, income taxes. We should pay the government for the services we consume, which benefit is just about proportional to what we consume. So we should pay zero income tax, and maybe about 25% sales tax: a $16T economy should support a $4T expense at Federal, state and local budgets. Easier to collect from fewer points, easier to shut down violators' business, and encouraging savings instead of wasteful unnecessary consumption, with a built-in "tax break" bonus. Just a few tweaks to make essentials like raw food, raw cloth, median primary rent/mortgage tax free, and equities at a nearly negligible rate.

That is reality. Just working in a virtual world doesn't mean your body isn't consuming services with a cost in the real world. Ducking the taxes is a losing game for the rest of us subsidizing them.

So can I write off losses on stuff I sell?

[financialguy (680124)]

I don't have a problem with people getting taxed in principle- as some here have already said, some people make a living doing this and why shouldn't they pay their taxes like the rest of us?

BUT, unless you got the stuff you're selling for FREE, your income is only your profit.

My point is that if they're going to tax you for your profits, they should also tax you for your losses, just like with sales of stocks, bonds, etc.

In reality the IRS is NOT fair (but neither is the tax code in my opinion). Thei

One big difference

[HangingChad (677530)]

You can run your eBay store from Bermuda, Antigua or Grenada just as effectively. Avoid paying US taxes, live near the beach and enjoy a comfortable living in a place that doesn't ask a lot of questions where money is concerned. Same thing with any other online venture. It raises an interesting point to consider when thinking about taxing online enterprises. If the taxes get out of hand in the US or UK, what's to stop the owners from moving to a more tax friendly country?

It's a lot easier to move an eBay store than Wal-Mart. And you can still use UPS to send your shipments in most countries. How convenient.

I'm not sure the IRS is the right organization to be making that decision, but it's probably faint hope expecting Congress to address the issue. Keeping the US friendly to business from a tax standpoint to keep us competitive. The same body that can't even agree on when to pull our troops out of Iraq.

3rd party seller

[ianchaos (160825)]

My Grandmother (89 years old) is quite net savy: email, instant messaging, and ebaying almost daily. The vast majority of the items that she sells on ebay however are for other people who live in her massive assisted living complex. Last year over $12,000 worth of goods went through my Grandma's ebay account. She only charges the people a dollar per posting (on top of the normal ebay posting charges). For her it's just a fun hobby, so her net income off of that amount was almost nothing. With this kind action by the IRS my Grandma would be held liable for the taxes on that $12,000, regardless of the fact that she didn't really make any kind of profit from it.

I'm sure that there are many people who sell an item here or there for a friend on their ebay account. There is no way for ebay to distinguish a personal sale from a 3rd party transaction, so for ebay to report this information to the IRS as profit could be wildly inaccurate.

Re:3rd party seller

[Oligonicella (659917)]

Simple. Your grandmother needs to start keeping very detailed records. She must prove to the IRS she didn't make $12K. I don't see the problem, other than her hobby became more detailed.

The Scum Quotient.

[Fantastic Lad (198284)]

Simple. Your grandmother needs to start keeping very detailed records. She must prove to the IRS she didn't make $12K. I don't see the problem, other than her hobby became more detailed.

The problem is that she has to keep very detailed records. Running your own swap-meet garage-sale thing on-line is fun. Keeping detailed records for the benefit of a bunch of pathologically corrupt, parasitic government scum is not just un-fun; it's infuriating.

-FL

Re:

[Shadowlore (10860)]

She must prove to the IRS she didn't make $12K. I don't see the problem,

So you are OK with the government making allegations and the accused has to prove them false?

Well if that's your belief so be it. But when the government crashes down your door and accuses of oh say rape, murder, or treason and you have to prove your innocence instead of them proving your guilt, don't whine about getting screwed.

the irs may be sorry if it does this

[The_Rook (136658)]

be a little realistic. the irs is not going to go after anyone selling off an old laptop or the flotsam and jetsam of everyday life. mailing the letter asking for the taxes on the sale of a pair of old sneakers would likely cost more than the taxes collected. and if they have even a small fraction of taxpayers substantiate their original purchase price and selling costs etc. the total effort won't be worth the tax collected.

more likley, the irs wants to capture taxes on income from undocumented businesses - that is, people who sell stuff on e-bay on a continuing basis by making things to sell (like soap, homemade tomato sauce, etc) or who buy things from local wholesalers for resale on e-bay.

the pitfall i see for the irs is that it's actually rather expensive to do business on e-bay. unless an e-bay seller's product has a huge markup, the actual profits are rather small, if there is any profit at all. the irs may create a hugely expensive documentation requirement for itself as well as e-bay to generate very little in the way of tax revenue. it would be a disaster if it cost more to collect the taxes than the tax revenue generated.

Fraud

[rtechie (244489)]

I for one am in favor of this move. Not because I think people should be paying more taxes (When people are going to great lengths to avoid a tax, it's a sign that tax is unfair. Nobody should be paying income taxes that makes less than $100,000 per year.) but because this might do something to prevent the rampant fraud we see on eBay. The fraudsters aren't likely to want to pay taxes, and collecting taxes will probably require eBay to collect more information on sellers, which will reduce fraud. Especially if eBay faces financial penalties for not properly collecting tax revenue.

Here's hoping.

Oh Please

[dreamchaser (49529)]

They'd be doing this regardless of who is in office. It's what the IRS does...it goes after people who avoid paying taxes on income. As for your gratuitous statement about who will and won't pay the taxes, you do know that 79% of the tax burden is carried by the top 20% of income earners, right?

Maybe for once we should stop being partisan and take a good honest look at these issues rather than using them as a soapbox to attack one side or the other on the political spectrum.

As for the topic...as long as our tax code doesn't get fixed this is entirely correct of them to do. And as for those selling MMOG goods, I hope they all get audited. I pay my taxes, and a healthy amount of them. Why should some guy making $50,000 a year selling Ultima Online gold (for example) not pay any?

Re:

[timmarhy (659436)]

right on. i make a decent income, you wouldn't class me as "rich" but i work long hard hours and sacrifice family time and personal time to try make a contribution to society and to increase my wealth and the well being of those around me. why the fuck should some asshole have the right to avoid paying what i have to pay just because he's doing business online?

Re:Oh Please

[fyngyrz (762201)]

Charging sales tax again is double-dipping --like they do to you when you buy/sell a car, boat, etc.

The entire system is based on multiple dipping, and the lower you are, socioeconomically speaking, the more dips you pay.

Say a corporation pays an employee $20000, and he pays $500 in taxes of which, 100% comes from its customers. So the customers are paying the salary and the taxes for the corporation's employee. In the meantime, the customer is paying those costs with what is left over from his income, after tax. So the customer in every case pays his own taxes, and then those in the economic pyramid above him from what remains after his taxation.

Here's another one. Some company - say the gas company - decrees, for whatever reason, to have medical coverage for its employees. Where does that money come from? Why, from the gas company's customers, of course. So as a customer, you pay for the gas company's employee's medical coverage out of your income before you can pay for your own. Same for the bank employee and so forth.

You don't get to say, for instance, that you spent all of your income ($20000) and of that, 27% went into paying other people's taxes, so you shouldn't be taxed on that part of what you spent. Oh no. You pay your taxes, the taxes of the guy who hauls fuel for your car, the taxes of the guy who sucks the oil out of the ground, the taxes of the guy in the convenience store where you get your fuel, and the taxes of everyone else from whom you purchase a good or service, and you pay this out of your taxable income. Nice, eh?

So the fact is, the people at the bottom of the pyramid have everyone else's costs built into their incomes.

But it is actually worse than that. Unlike taxes, the progression is reversed, percentage wise. Got a lot of phone business to do with the phone company? Then they'll reduce your rates, special deals, good customer, yadda yadda. Percentage wise, you're now paying less for the medical care and taxes of the phone company employee than is some single mother who has a phone on the basis of the services of the phone company you actually receive. That leaves more for you to pay your own costs both on a percentage basis, and on a real basis.

Our economy literally sits heaviest on the shoulders of those at the bottom. It is designed to do so, or at the most optimistic, has evolved to do so.

Re:Oh Please

[ScentCone (795499)]

Maybe for once your partisan republican ass should stop making blatant lies?

You're actually saying that, and then linking to an "analysis" that cites a fictional town with a flat tax rate as an example of why he's wrong?

Income, property, and other tax rates are NOT flat. They are largely "progressive," which translates to "punitive." Here are the numbers, released by the IRS, based on last year's taxes:

84.6% of all federal income taxes are paid by the top 25% of earners
96.7% of those taxes are paid by the top 50%
The top 1% pay over a third of those taxes.

And just to flesh out the picture: the lowest-earning fifth of the citizenry receive over $8.00 in government spending for every $1.00 in taxes paid. Middle income households receive $1.40 for every dollar paid, and the high end people receive $0.41 for every $1.00 they spend. Government spending aimed at the lowest-earning 60% exceeds that which is collected from them. It's simple redistribution, and the more you make, the more it tilts away from you. Your flat rate fantasy example is complete BS (but, you knew that).

Re:

[zacronos (937891)]

What the previous poster's link points out is that statistics such as those will *always* provide numbers that look warped, because the statistic itself is inherently slanted. Even a flat tax rate will yield similar numbers (and they'll be more extreme the more disparity there is between the top earners and the bottom earners). If, instead, we saw statistics such as:

the top 1% of earners pay 1% of all federal income taxes
the top 50% of earners pay 50% of all federal income taxes
the lowest 1% of earne

You're lying, the rich pay LESS taxes

[raehl (609729)]

You might have a point, if the only taxes people paid were income taxes.

Income tax is progressive. But social security tax is not.

So, someone making $1 million a year may be paying 35% in income taxes, and someone making $35,000 a year may be paying 25%.

But social security tax maxes out at about $90,000. How much is social security tax? 12.4%.

So, if you're making $1 million a year, your marginal tax rate is 35%.
If you make $35,000 a year, your marginal tax rate is 37.4%! (I've left out the 2.9% for medic

Re:

[Snorpus (566772)]

It's not the arithmetic that I disagree with, it's the assumptions of population and income distributions.

... but the real world will have people making A LOT more that 500k, and A LOT more people at the lower two income brackets.

In the United States, at least, the income distribution is roughly normal, with admittedly a long (but very low probability) tail in the higher incomes. The blog's example has 150 people making $30K or less, and 11 making $30,001 or more.

Re:MMO Black market

[vertinox (846076)]

It's "technically" "illegal" to sell most MMO stuff like gold and characters, at least for the most heavily populated. The irony?

No... It is not "technically" illegal. Violating an EULA does not actually violate any criminal laws. They can of course refuse you service or take you into civil court for a breach of contract but they cannot impose criminal fines or jail time on you for such an act.

Secondly, the IRS still requires taxes paid on money gained through illegal means. Drug dealing, gambling, bootlegging, extortion, and laundering all count under this aspect. Chances are if they can't prove you are doing something wrong they will nail you for tax evasion.

Happened to Al Capone since they couldn't get him any other way.

Re:MMO Black market

[apathy maybe (922212)]

I recall the story of a brothel owner in the US who was only prosecuted for running a brothel. She paid her taxes, had a good working environment for the workers, health insurance and all the rest. (Of course, I can't find a link to the story.)

Moral of the story? Don't get cause for speeding when leaving a bank robbery.

Or in other words, break only the law that you intended to, and not any other.

On topic to the story, in Australia at least personal items are not taxed if sold, and don't have to be declared for either Centrelink (the government handout department, they pay my way!) or the taxation department. As far as I know, hobbies also don't have to be declared (or maybe they do, but just aren't taxed).

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[Detritus (11846)]

The IRS isn't stupid. They have limited enforcement resources and generally apply them where they will get the highest return. Remember that moron who won $1 million on the Survivor TV show and tried to skip out on paying taxes? He's now inmate #05559-070.

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[keraneuology (760918)]

Indeed. Come to think of it, the number of people who have salaries over $1,000,000 probably number far fewer than a million... shall we stop chasing income of that subset?

Why?

[ScentCone (795499)]

wow. The war in iraq must be getting dicey if we are chasing after the income of less than a million people.

Why should that surprise or amuse you? All of the talk about how the "rich" should pay more taxes is talk about a lot less than 1 million people. And, um... why focus on DoD spending? What about people who buy their blood pressure medicine with money that was taxed from you, rather than just eating fewer cheeseburgers and giving up smoking (especially since the cigarettes cost more than the dose of

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[Planesdragon (210349)]

I've got karma to burn. The parent isn't trolling --- but telling it like it is.

No, he's trolling.

Let's say that you individually make $60,000 a year on ebay, and you skip out on the income and sales taxes. Assuming a 20% federal income take (as this is likely in addition to your regular job) and a 10% state income-and-sales take, that'd be $12k that the federal government either has to do without, borrow, or get from the rest of us, and $6k that your state has to do the same with.

Tax policies aside, it's just a rule of law thing. the law says pay the tax, so you pay the tax -- and

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[briancnorton (586947)]

That's not what they're going after, it people that make a living and pay no income taxes, in some cases getting paid (by you) to do so. Sales tax isn't the issue, it's income tax. If EB sells an Xbox, they have to report the revenue for their business income taxes. If you buy a lot of 100 Xboxes and sell them across state lines, you legally avoid sales tax. If you make 10,000 dollars doing it, that's income just like EB had, and you owe your share of that just like everybody else.

And your approval of w

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[ciscoguy01 (635963)]

You would need to keep good records to show that you didn't "make" money on the sale. In your case I would think you could actually report a loss of $100 and that would reduce your taxable income. Keep in mind that I'm not a tax expert or even a tax newbie...

You said it. The problem with all this is ebay reports to IRS that you sold something for $50. What they don't report is that you paid $300 for it, used it, didn't like or need it and are now selling it for $50.
It creates a whole new accounting nig

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[sumdumass (711423)]

I think there are two distinct issues at hand here. You getting $45 for a stereo that cost you $150 new isn't one of them.

First, there are people who go yardsale-ing and pick up loads of crap for next to nothing and then turn a profit on Ebay. This is the same as the corner store buying crackers from Nabisco and selling them to you for a profit. That profit should be taxable income-minus expenses.

The next issue is tax depreciations. Several items when used in conjunction with a business can be depreciated o