I can’t sleep. So I figured, fine – I’ll read the latest in my tax news digest (thanks for that tip, Diane!) and see what’s what. It might put me back to sleep.
Or, it might make me sit up and go “What?!?!?!!!”
You’ve probably been reading about the various foreclosure rescue bills that are floating around Washington. The most recent one is HR 3221 – the Foreclosure Prevention Act. It’s got a noble title and it’s full of good intentions. Right? Helping people to keep their homes, etc., giving a credit to first-time homebuyers who purchase foreclosed properties … it’s all good. Right?
Sure – right up until you look at some of the ways Congress is proposing to pay for it. These two little provisions were quietly stuffed into the bill with no debate or notice:
Payment Card and Third Party Network Information Reporting. The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011.
Exclusion of Gain on Sale of a Principal Residence Not to Apply to Nonqualified Use. Gain from the sale or exchange of a principal residence allocated to periods of nonqualified use is not excluded from gross income. A period of nonqualified use means any period (not including any period before January 1, 2009) during which the property is not used by the taxpayer or the taxpayer’s spouse or former spouse as a principal residence (e.g., rental property). The amount of gain allocated to periods of nonqualified use is the amount of gain multiplied by a fraction the numerator of which is the aggregate periods of nonqualified use during the period the property was owned by the taxpayer and the denominator of which is the period the taxpayer owned the property.
I don’t know about you, but I find the idea of eBay, Amazon, Google Checkout, and every other business I deal with (including my own!) reporting transactions to the IRS to be a gross invasion of privacy, not to mention raising serious concerns about the potential for identity theft. And the gain exclusion reduction will hit homeowners hard – especially people who’ve had to move to save jobs, and rather than walk away from their homes, they’ve chosen to rent them and keep the mortgage current.
There’s a PDF file attached showing the summary of the bill – you’ll find the two amendments on pages 11 and 12.
I still can’t sleep. Just not for the same reason!