June 20, 2008
Dear Senator:
On behalf of the National Federation of Independent Business, the nation’s leading small business advocacy organization, I am writing to highlight our concerns with the merchant card reporting proposal included in H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act.
Merchant card reporting would be a new requirement for the merchant card companies and the cost of establishing this new system will be passed on to small businesses. Small business owners will also have to ensure that their records conform with the additional information reported by the merchant card processor. This is an additional compliance step, which will add to the already high cost of tax compliance for small business owners, who currently spend on average over $74 per hour to meet tax paperwork and compliance burdens.
Closing the tax gap is important, but we would urge Congress to focus on simplifying the tax code, collecting better research about sources of the tax gap, and providing outreach and education of taxpayers rather than adding new reporting requirements and increasing the compliance burden.
We appreciate the Finance Committee’s efforts to take our comments into consideration after releasing the staff draft of the merchant card reporting proposal and to make some changes, most importantly providing additional time to enact both the reporting and Taxpayer Identification Number (TIN) collection process. We still have concerns with the proposal - in particular the back-up withholding requirement associated with collecting TINs. Merchant card companies are currently not required to collect this information, so it is crucial to ensure that the merchant card processors are provided with enough time to implement this new system. Failing to ensure that the system is operating adequately could subject small business owners to back-up withholding penalties as high as 28-percent.
Again, while we continue to have concerns about the impact this proposal will have on small businesses, we look forward to continue working with you to address these concerns.
Sincerely,
Dan Danner
Executive Vice President
Public Policy and Political
