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Ron Whitney�s Unstinting Efforts On Behalf Of U.S. Commercial Barter Industry

Kudos to IRTA board member and lawyer Ron Whitney, president and founder of Barter Network (www.bniusa.com) in Chadds Ford  (PA), who has taken considerable personal time to write a position paper on Form B Notices for tax withholding.

His position asserts that trade exchanges (barter companies) should be excluded from having to send Publication 1281 B-Notice back-up withholding letters to barter clients as a matter of fact and law.

Recently he traveled to Washington, DC, on behalf of IRTA. There he attended a special IRS reception for the agency�s partnerships, which included IRTA. While at the reception Whitney was able to meet and talk with IRS Commissioner Mark Everson, Small Business Commissioner Kevin Brown, Chief �E� Officer Phyllis Grimes, and key members of IRSAC (IRS Advisory Council).

Whitney�s unstinting efforts, as well as his attendance at this special reception, established good relationships for IRTA�s continual work on behalf of the commercial barter industry. Below is a copy of Ron Whitney�s actual �position memo.�

Date:   January 25, 2006

Re:      Applicability of Back-Up Withholding Requirements of Publication 1281 To the Organized Barter Exchange Industry

PROBLEM:

Publication 1281 � �Back-Up Withholding for Missing & Incorrect Name/TINS�, requires organized barter exchanges to back-up withhold on accounts with non-matching TINS/SSNs.  Such requirement is impossible to comply with since barter exchanges do not maintain or control ANY cash accounts of their clients from which back-up withholding could take place. As third party record keepers, barter exchanges maintain trade accounts, (not cash), for their members.                    

NEGATIVE RESULT: 

The aforementioned internal IRS systemic problem causes undue hardship to the barter industry in the form of unjustified fines, penalties, and appeals.

BACKGROUND:

Pursuant to the TEFRA of 1982, barter exchanges file annual information returns with the IRS verifying the total amount of barter sales for each of  their member clients.  The members also receive a 1099B form to be included with their tax returns.  Incorrect SSNs/ TINs on file with the barter  companies may arise from clients� misrepresentations or disappearances. Publication 1586 � �Reasonable Cause Regulations & Requirements for Missing & Incorrect Name/TINS� was the controlling standard for decades on the issue of non-matching SSNs & TINs.  It required barter exchanges to show �the failure was due to reasonable cause and not willful neglect.�  The 12-2004 Revision of Pub. 1586 now requires barter exchanges to send �B-Notices� to non-matching clients threatening to back-up withhold pursuant to the dictates of  Pub. 1281, and abatements are granted or denied based on an exchange�s compliance with �B Notice� solicitation rules. Theresa Spillett, IRS Tax Specialist, Holtsville, NY office recognized the impossibility of barter companies complying with Publication 1281 in her 3/15/05 penalty abatement letter, (attached), to Barter Network Inc.: �You also established the fact you are unable to by law comply with back-up withholding as these payees� accounts are not cash accounts.  They are paper accounts, as they barter their individual services for other services.�

SOLUTION: 

The back-up withholding requirements placed on barter exchanges as codified in  Publication 1281 must be removed, since compliance by barter exchanges is impossible as a matter of fact and law.