Small Brokers Are the
Most Dangerous"> No lawmaker has yet stepped forward to support the IRS proposal, but the CDT points out that the measure "could easily find its way into a larger legislative package." Its the small fry brokers that have privacy experts concerned, not outfits like Amazon or eBay. "There are big guys like eBay and Amazon. One assumes theyre pretty much reputable, but how about some of the other companies? It certainly does increase the prospect for fraudulent use of SSNs," said Paul Stethens, a policy analyst for the Privacy Rights Clearinghouse.A bigger, theoretically more reliable company such as eBay might be trusted to store TINs. But the issue is in fact moot to eBay, which claims that the proposal wouldnt apply to its business model, given that its a marketplace, not an auctioneer or broker. "Most states have a legal definition" of what an auctioneer is, said eBay spokesperson Catherine England in an interview with eWEEK. "We dont actually mediate the transaction. We never take possession of the items; we dont take possession of the money. That happens between the buyers and sellers." eBay can only track listings and can determine if a given listing has closed. But whether transactions have occurred is information it cant confirm, since transactions happen off eBays platform. Its a good thing that eBay has been working with federal agencies to try to educate them on how its business model works, because those agencies sure dont share eBays notion of whether or not their proposals apply. A recent report that came out of an IRS committee on Small Business/Self-Employed Subgroup called the growth of the Internet "explosive" and said that it has brought about an increased number of ways to open a business, one of the more popular type being the selling of new and used items "through auction sites such as eBay.com, uBid.com, etc." The report goes on to reference a 2005 ACNielsen report that found that more than 724,000 Americans report their primary or secondary source of income through eBay.com. It is likely, the subcommittee continues, that a "significant number" of eBay or uBid customers either "choose to ignore income reporting requirements or are unaware of their obligations, thus contributing to the tax gap." Theres an underlying assumption at play with these proposals, eBays England pointed out, namely that "folks are assuming our sellers, who are engaged in frequent transactions, arent already reporting [taxes]," she said. "Ive seen no research or evidence to indicate thats the case. Most of our sellers are running small businesses. The assumption that eBay business are underreporting to the IRS" hasnt been demonstrated in any research that shes seen, she said. Study: eBay and PayPal remain the top phishing targets. Click here to read more. The Treasury Department does base its proposal on research, Desouza said. That research, however, is a tad dusty, dating back to 2001. They may be old numbers, but thats all the Treasury Department has to work with, Desouza said. "We stated in [documentation] and in the presidents budget that were requesting additional funding to increase our" taxpayer compliance reporting, he said. "Our specific proposals were done off of 2001 research on how much taxpayers are compliant," he said. "Through that study and a vetting process of sorts, we came up with 16 proposals to make sure theres a balance between increasing compliance and unduly burdening taxpayers. And this is one of them. Throughout the study, we found that compliance significantly increases with third-party reporting." Even if the government were to collect substantial amounts of unpaid tax, privacy experts still fear the possible impact. "It will open up a Pandoras box with requiring individuals to provide a SSN for transactions for which theyve never had to provide SSNs before," said the Privacy Rights Clearinghouses Stethens.
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"The problem here is youre getting involved with entities that in many instances might not be well-known to the person whos doing the selling," he said. "We provide SSNs to banks and to employers, but theyre well-known. When youre dealing with a company online, how do you check that company out? What standards do they have for protecting your SSN?"