You don’t hear this often: Kudos to the IRS. They’ve stopped plans that would have been a nightmare for small business recordkeeping. The Phoenix Business Journal reports:
The Internal Revenue Service has dropped plans to require businesses to reconcile their receipts from credit card transactions with reports filed with the IRS by third-party payment entities.
Legislation enacted in 2008 requires these third parties to report how much every merchant is paid each year through credit cards, debit cards or services like PayPal. For the 2012 tax year, the IRS planned to require businesses to reconcile their records with these third-party reports when they file their tax returns.
The IRS decided to drop this requirement after complaints from small-business owners, who said it would pose a significant burden on them. They noted that the amount recorded on credit or debit card purchases often does not equal the revenue a business receives from the transaction. For example, customers often get cash back on debit card purchases or receive cash when they return merchandise purchased with credit cards.
Legislation to overturn the requirement recently was introduced in the House. On Feb. 9, however, the IRS told small-business groups it would not impose the reconciliation requirement for 2012 tax returns, “nor do we intend to require reconciliation going forward.”
“We appreciate your work with us in this and other areas as we continually seek to improve our processes and to minimize compliance burden on taxpayers,” wrote Steven Miller, the IRS’ deputy commissioner for services and enforcement.
Business groups praised the agency’s decision.
“The IRS did the right thing, and they should be applauded for listening to the concerns of the small-business community,” said Giovanni Coratolo, vice president of small-business policy at the U.S. Chamber of Commerce.
“We were very pleased that the IRS took time to listen and work with us to resolve this matter in a satisfactory manner,” said Bill Hughes, senior vice president for government affairs at the Retail Industry Leaders Association. “This will relieve retailers of an unnecessary burden while still providing the IRS with the tools it needs to ensure tax compliance.”
Dan Danner, CEO of the National Federation of Independent Business, called the IRS reversal on the reconciliation requirement “a small, but important victory for small business."