Gearing Up for Tax Gap Fight

 

The U.S. Chamber is at the forefront of a fight against a payment card reporting proposal that would increase debit and credit card processing costs for small businesses and expose them to needless audits.

 

Congress is considering this proposal as one of several measures to close the tax gap--the difference between what is actually owed in taxes and what the IRS has collected. The IRS puts the tax gap at $290 billion, with at least $100 billion coming from underreporting by the self-employed.

 

"You can't solve the tax gap on the backs of compliant small business taxpayers without suffering economic consequences," says Giovanni Coratolo, the Chamber's small business policy expert.

 

The payment card reporting proposal would require merchant processing companies, such as banks and credit card companies, to report each participating merchant's name and address and his or her's total yearly amount of payment card transactions to the IRS.

 

Further, the reporting organization would have to validate each participating merchant's Taxpayer Identi-fication Number (TIN). If the TIN does not match, then the electronic payment organization would have to withhold 28% of all payments to the participating merchant.

 

The Chamber and its Coalition for Fairness in Taxation are working to prevent the proposal from going forward because it unfairly places burdens on honest and compliant business owners; does not require the IRS to show how it intends to use the information; and would impose substantial implementation costs that could be passed from electronic payment organizations to compliant small business taxpayers. In addition, minor paperwork mistakes could result in anticipated funds not being deposited on a timely basis into the bank of a participating merchant. Learn more.