A proposed new tax plan from the Bush Administration, has hit the Congress and the Senate subcommittees. The new tax collection program would force credit card companies to report merchants’ income to the Internal Revenue Service. The proposed changes to the Fiscal Year 2009 federal budget is designed to collect more than $36 billion in new revenues for the federal government over the next 10 years.
If the changes are to pass, credit card companies will need to report all transactions of all businesses that have merchant accounts with the card issuers. The IRS would then be notified of all transactions that are tied to each merchant’s taxpayer identification number.
The problem is that some sole proprietors and small business owners still used their social security number instead of a tax identification number. If the IRS does not have a tax ID number, then credit card companies will be forced to hold back 28 percent of receipts for those businesses. OUCH! Understandably, many small businesses will suffer and many will simply be put out of business completely with this new legislation.
Small businesses should not panic just yet. This new legislation is not being received well among the powerful DC lobbyist connections. At the end of the day, maybe small businesses will decide to not accept credit cards any longer. That fallout would certainly cause another entirely different set of problems for our country’s economy.
