IRS wants Amazon and eBay to report seller income

Did you report your bookselling income on your tax return last month? Lots of part-time sellers don't -- they figure they aren't required to report income from a "hobby."

But if the IRS has its way, marketplaces such as eBay and Amazon will report our income next year on a Form 1099. They won't withhold any of your income for taxes, but they'll issue the 1099, just like you get a W-2 from a regular job. And since there was no withholding, you'd have to pay quarterly estimated tax payments.

How would Amazon and eBay do this? They'd require us to provide our Social Security number (or employer tax ID) as a condition of selling on their site. That's exactly what is proposed in the Bush Administration's 2008 budget: If you conduct 100 transactions totalling $5,000 or more during the year, your income would be reported to the IRS by Amazon, eBay or any other company that "brokers" online transactions.

According to this story at ComputerWorld, the reporting would begin on January 1, 2008.

The idea is unpopular with lots of people, including this policy group. They warn that providing our Social Security numbers to selling venues can increase the risk of identity fraud.

What do you think?